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Money, Debt and Growth
1. 2. 3. 4. 5. 6. 7. Presence Givenness and Confidence Making Unalterable Growth and Money’s Modern Origins Debt and Growth Recovery and Restraint Humanity as speculation
In this chapter we tackle the question of money. Each of us is familiar with it and believes that we would be able to achieve more if we had more of it. But what is money? Money is a medium that makes flows visible. It signals the flows that, over the long term, transfer goods from one generation to the next. Life is transferred from one to another generation, so all the material means of life by which our bodies are sustained must move from older people to younger people. Money enables us to observe this flow, but it also disguises it. We have discussed what one generation owes another; in this chapter we relate money to the issue of who owes whom, and to the idea of growth.
Embodiment A society depends on its acknowledgement of the debt between parents and children and between one generation and another. Without this sense of obligation to a new generation, no new generation would appear and society would come to an abrupt end. If we feel no gratitude to those who were generous with us, we will not know how to be generous with one another. Without an understanding of what we owe to previous generations, we will begrudge leaving anything to future generations. Face-to-face, person-to-person We present things to one another. Perhaps the most fundamental gift that can be given, is life. Your parents gave you life. Whatever you gave them would be a form of acknowledgement of that prior gift of theirs. Your gift would tell them that their offspring recognises the goodness of his life and is glad of the love that created it. The most fundamental gift you can give your parents is a grandchild. When you present your first child to your father and mother you demonstrate that you are aware that you have received your existence from them and regard that gift as good. By bringing generation one face to face with generation three, you communicate that they have not wasted their effort and so you vindicate them. Grandparents, uncles, aunts, cousins, neighbours and friends come to pay homage to mother and baby, bringing clothes for the baby and so starting the torrent of gifts that appear at all subsequent birthdays, the impracticable character of which indicate the gratuitousness of the original arrival of new life. The sheer bodiness of babies is the obvious thing about them. They cannot help you, so you have to help them, entirely. Their neediness encourages us to pick them up and take them into our care, a gift impossible not to accept. Though all persons may come as gifts, the gift of the newborn is not obscured by attempts at reciprocity. Parents and friends must pick them up and lead them into all the complex forms of reciprocity by which they will learn to relate to others.
Grandparents must turn up and be present to their grandchildren in order to pass on to them knowledge of their origins, give them the familial basis of their identity and with it, assurance of their value. They give their grandchildren a past, a context and with it an identity; when those children know their origins they can begin to bring their own particularity to bear in their encounters with others. Decades later they can tell their incredulous grandchildren about their own parents and so communicate a sense of intergenerational continuity. Such private family sentimentality is the means by which any of us becomes a mature and public person. Through years of care and interaction children grow into greater command of their bodies, and increasing ability to reciprocate and take up their personhood as a public status. They learn how to inhabit their own bodies as the instrument of their public personhood. Over the long term all economic action must serve the upbringing of another new generation. All commerce is the slow transfer of property from the older, receding generation to the younger, advancing generation. The exchange of commodities has to serve those who are directly involved in this work of first providing infants and then supporting them whole they grow to maturity. The economy is about turning children from mere bodies into adults in the course of two decades, in order that these adults will so affirm one another in the market and public square that they will then be ready to repeat the process. The economy has no other end than to serve this process of the procreation and formation of persons. The more that this purpose is obscured, the greater is the disincentive to embark on procreation. Nonetheless the torrent of manufactured goods can only have this as its end, for everything we do, the commodities that we purchase, all derive from our parent’s gift of life to us, and serves to reflect that gift by this return gift. The continuing presence of the tradition We may bring a new generation into existence. We have all the permission that we need. By producing a new generation we honour our parents, their parents and all our forebears. We hope that our children will do the same for us when we are gone, and that their children do the same for them. We make this more likely if we remember our own forebears. If we decline to make this acknowledgement and pay this debt, no one will do for us. We have to assume that intergenerational debt will continue to be acknowledged and paid, or . We have permission to bring a new life into existence. Our society’s past gives us all the licence needed. That the past has resulted in this present is reason enough for us to work for a continuation and future. We may take that ‘was’ as our own ‘shall’. Life is part existent (‘is’) and part to be sought (‘ought’), part present and part future. It is faith that holds together that ‘was’ and this ‘is’ and this ‘should’ and ‘will be’. This connection and unity is not imposed, it but may be discovered, with joy. Our past gives us the licence we need to enter relationship and do business with one another. We may have sufficient confidence and motivation to work and bring new things into existence, and to go into the public square in order to procure what we need and so we have an economy. An economy depends on such presumptions in order that there be continuity and stability; continuity is more fundamental than change or growth. At the basis of any economy is the gift of life and its later thankful acknowledgement as a second generation presents a first generation with a third, so that generations continue to come face to face with their forebears and successors and recognise and affirm them in gladness. Presence and co-presence – Every transaction is a meeting of persons. We see some transactions as encounters of two persons, others as encounters with many persons with whom it is impossible to come face-to-face. But even when there is no explicit meeting,
but an apparently faceless process, a transaction is an encounter of two persons, and through these two, of many persons. The two parties will of course meet and come face-to-face when the transaction is important enough to warrant it. But every single transaction is fundamentally a meeting of persons, and we may regard all of them as a meeting face-to-face. We will deal with the transaction both in terms of two and of many persons, whose encounter takes the complex form which we will describe in the next chapter as ritual. First though we must concede that each one of us is not simply one, but one who is also many. Each of us is both an individual person and the work of many other persons. No individual is his own creation. Since each of us present to other persons in the world because we have a body. It is our body that makes it possible for others to find us. But this body is not our own creation. From the first we found ourselves in it, and are unable to find ourselves without it. This body, which is the form our presence takes, is their work, and thus evidence of their presence too. Our presence in the world is not merely a matter of what we do, but also of what all others do for us and what they do to us. Their action serves to make us the people we are. In large part we receive our life and identity from others. We talk each other up and we talk each other down and thus our individual stock as a public being goes up and down in the market place of public opinion. And we give one another the material means of life, for we are bodies that need sustenance. We talk one another up and we give one another the material means of life: for embodied persons these two elements of material provision and public recognition are required. Persons may meet one another only because they have been taught to inhabit their bodies as members of society, and this because many other people, parents and others, invest their effort over many years in order to make this possible. Our bodies are the means by which we can be present to one another, physically, in one place. Bodies are not inert things; they are the means by which we are present to another, and thus are persons. Making one another present Now imagine that we meet face to face. You are one person and I am another, yet we are not simply two individuals. I am the product of many people and though you do not see them when you meet me, but I could not be present before you without them. I can modify my presence, but I cannot entirely create it. I am made presentable to you by the clothes I chose for our meeting. When I come into the room to meet you for the first time I am wearing a particular set of clothes. I picked this shirt and jacket in the hope of giving the right impression, of appearing sober and trustworthy, the kind of person you would ready for an ongoing relationship with, to do business with, at least not recoil at. I chose this shirt, from the many shirts in the shop, in anticipation of just such a meeting. This shirt makes me presentable to you to the degree that it appears to have sprung from its cellophane wrapper, free of association with earthy material or to anyone's effort. It was made by someone on the other side of the world, servicing machinery designed, built, transported, insured, fuelled and driven by people from all corners of the world in connections only traceable statistically. You see me better because you see me in this shirt. You don't see the many people, unknown to me, who made this shirt. The material means by which we make ourselves presentable and so present to one another are a token of our success in separating the work from its makers, making the commodity visible, with it to make ourselves visible, and its makers invisible. I am dressed and covered by other people. Perhaps you should see the clothes I wear or car I drive as evidence that I have been coercing people, on the other side of the world, to supply me with the material resources by which I intend to
impress you. If you are discerning enough you may be able to tell whether they have not been recompensed, so that unknown to me, my appearance communicates more about them than it does about me. This is my body. Of course you have to be in the same room as me, or at least see a picture of me, in order to see it. My body is a function of the food I have put into it, but I didn't produce any of this food myself, nor have I ever met any of the people who produced it for me. Given that I eat so many kilos of meat a year, you could estimate that I am the product of so many animals, so many hundredweight of vegetable matter, transported to us by so many tons of fossil fuel. Yet, you have been brought up not to see these many animal or vegetable inputs when you see my body, but just to see me. Every one of us is a material being, a creature of flesh, who requires inputs that he is unable to source for himself. Imagine a peasant farmer. He regards his animals as the meat that will feed his family: when these animals are eaten their bodies will become part of his body and that of his children. They are animal bodies now, but they will turn into human bodies by next year. As he looks at this flock or herd he knows he is looking at the future of the bodies of his own people. And what is so for him is true for us too. In order that your body remains healthy so that you remain alive, something like the following events have to occur. A farmer takes his flock to market where they are bought by the wholesaler; the slaughterman turns them into carcasses; the butcher who turns these into packets of meat taken on by the distribution people, the freight transport people, who are supported by the insurers, the transportation people and all who crew and service those craft and maintain that network, and all those who train them, and police and protect them. The meat of this sheep travelled from a hillside on the far side of the world to your plate because a hundred people operated the machinery by which this meat was packed in this box into this pallet, into this container and this trolley and onto this display shelf. We may not see them when we put this cut of meat into our shopping trolley, but it is our evidence that this great host of people has done its work. They have provided us with the edible products that we have to consume in order to have a functioning body, and thus to continue be present before one another. Over a year our body is the product of thousands of people, supported by hundreds of thousands of others. At every point we can ask whether those people earned enough to keep their families and send their children to school. Our body is the synthesis of such agri-industrial processes, and thus we owe it to those many people involved in those processes. But we can ask whether they are built up by this process or exhausted and consumed by it? We do not know whether the food that has nourished and ultimately constitutes our bodies has come from producers who have not been adequately recompensed for, whose own bodies are not adequately nourished. We live with who knows what debts, our lifestyle sustained at what long-term cost. We may have been living at their expense. Despite all this my body is absolutely crucial to you. For when you decide that you want to do business, with me, we have to meet. We decide to come together, so that your body and mine are in the same room. We want to grip one another’s hand, look into one another’s eyes, and on the basis of a thousand tiny physical cues, each can decide whether the other is reliable enough to do business with. We want to see, hear, touch and smell the physicality of the other man in order to satisfy ourselves of the particularity of this event of transaction.
‘Cues of intimacy such as facial communication, testimonial and nonverbal gestures bypassed the filter of reason. They are compelling even when consciously disbelieved.’1 When it is important enough, every transaction must be based in this person to person meeting; at bottom, person to person meeting is all that every transaction is. We know that particularity, and some of the time, the unique character of such personal encounter cannot be faked. It has to be done properly. We can carry out great numbers of everyday transactions in the abbreviated account, that is, with money and ‘credit’, only because at other times we take care to perform the ritual of transaction in full, person-to-person. There can be many retail transactions because there are larger wholesale transactions, and there can be wholesale transactions because there are long-term contracts between persons, acting for corporations, who have secured their relationship with lots of expensive personal contact time. The food and other material resources that sustain my body and make me a presentable person travel from all corners of the world to reach me through hundreds of thousands of transactions, each of which is based in a contract secured through the face to face encounter of executives who crossed the world in order to meet. Although most transactions simply involve the communication of data, we may deal with them as person to person encounters.
2. Givenness and confidence
We need to relate two apparent opposite things. We need to establish that an economic contract is simply a convention, and to establish that those conventions that we call contracts are absolutely reliable and as unyieldingly solid as anything thing on earth. We need to show both that money is the function of people’s recognition and nothing more than that recognition. And we need to show that our financial and judicial institutions are nonetheless unshakeable. Economic reality is given, and it is given by us, or more specifically to us by our forebears in the hope that we will pass it on in good shape to our own successors. The fixedness of past event We want to get to know each other. We do so because we hope to gain from each other the recognition that each of us needs, and which we can only source from other persons. And through them we hope to gain the material means which support our bodies and so make us present to one another. We meet one another in the marketplace. Specifically, you and I have to meet in your offices or mine. We have a big contract that we want to award to someone and believe that you may be the right person for us. We see that you have the right qualifications, we know your reputation, we are convinced that you are a significant player and believe that business with you will be worth our while. Yet to give us greater confidence that you are worth this contract we need to know what credit you have, and that means we need to know your credit history. Tell us more about your previous big projects, and who else you have done business with. Convince us that you are the right person to give this contract to. Give us an account of yourself – again. Exchanging accounts We demand an account of each other for we want to know that the other person is worthy of our investment in him and we want evidence that he is going to invest in this relationship too. We exchange accounts of ourselves, and of our place in our industry. Our business relationship is articulated by this exchange of
Offer The Challenge of Affluence p. 359
our accounts of the world; each specific event is an abbreviation of the whole account. A business relationship is a conversation which is made up of the separate transactions which are our individual speeches. A transaction is an exchange of accounts. We want to be reassured that the other man shares our view of what we may achieve together. Our separate pasts open the possibility of a shared future. past is taken to enable a future, but we need each other before this future can take place. When we do not like the valuation that this group offer us, we can go to another, and appeal to them for a new and higher valuation of our place in a shared future. Money is a form of speech. In it we offer one another abbreviated accounts of our joint identity, and each is intended to bring about the relationship it describes. Every utterance intends to persuade: if enough people say that so-and-so’s stock is falling, it falls. We are worth what other people say and believe we are worth. ‘Utterances receive their value only in relation to a market’, as Bourdieu puts it.2 Business is about persuading audiences to give their consent for your account of what takes place. You have to convince them and hold them by out-narrating your rivals. You have to give them an attractive account of who they are, by telling them a story that offers them a bigger part than alternative stories provide. This story holds them for narratives have power. Action involves convincing an appropriate audience of your action. Various routines may be employed in order to bring about the acknowledgement of the necessary audience. It does so through the practices which our society refers to as the law of contract. Most transactions take place without the need to make these practices or that law explicit. Large contracts require a more thorough demonstration that all relevant practices and canons are being observed, and we instruct lawyers and accountants to be on hand to provide such demonstration. This transaction may take place because it meets the criteria and satisfies all relevant constituencies and audiences. Where there is doubt, the issue may be settled by a more prolonged public examination of how this case fits the rules established by all previous successful cases and how this transaction fits the precedent made by all previous transactions. Law courts rule on the basis of case histories. They decide which earlier cases the case currently before them is; they identify the precedents by which to understand this case. In court the two sides offer analogies from previous cases when these are accepted as analogies by the court, they argue from them. Argument (logic) follows analogy (narrative). The event of a contract is inseparable from the process of the creation of a narrative, and records of that narrative, and symbols that are abbreviated forms of those records and that narrative. Formalities are employed to enforce the sense of occasion that is intrinsic to any large transaction. Contracts in the ancient world were secured by creating a public event through the employment of animals and their blood, which we term ‘sacrifices’. A large public contract may require the employment of a good number of symbols and tokens. Even when two corporations sign a contract, the terms set down on paper are a public demonstration by the two parties to the witnessing and sponsoring community of the earnestness of their intent. At the founding of an institution there is an event, with speeches, votes of thanks and the unveiling of a plaque. There may be drinks and a banquet. A sense of the pure intentions of the whole project may be lent by public ceremony involving young people in sport or music. We may decide on a concert, fireworks, the release of doves, the giving of memorabilia to the participants. We will do whatever is required to make a memorable event, for we want to establish a widespread public recognition of this founding contract.
Pierre Bourdieu Language and Symbolic Power p. 77.
‘The persons present at these ceremonies followed, with attention either pious or casual, the progress of a ritual elaborates by specialists in the art. They were not interested in the details; all they wanted was that it should be a real ceremony... for rites essentially symbolise nothing, any more than music does. They do not necessarily refer one back to a different reality, to beliefs. They form a species of behaviour sui generis in which what matters is to do things ceremoniously, the details remaining arbitrary.3 The gesturing with these various props and tokens is intended is to create a narrative that will win and hold an audience to watch to see that the narrative is subsequently honoured. The audience bound by this narrative will be the guarantee of the contract. The paperwork and other ritual of the contract are the means with which this community is gathered and the contract is written, we might say, on the memory of the community that witnesses and judges it binding. Contract and oath-taking is the means of enthralment by narrative enlarged by the public gestures that require physical objects to serve as the props which amplify our gestures and create the drama which establishes and secures this new relationship which we have agreed upon. Physical things matter, for they remind us of our relationship and signal the existence of this relationship to others. Things in exchange There are three parties to every transaction. The third is made up the present audience. We hope that this audience is aware of the many earlier contracts secured by earlier audiences. Our ritual alludes to precedent and so the many people who have done things this way, and a satisfactory reference to precedents secures the contract. Things have places in relationships. We cement relationships by formal events, which are shaped by particular rituals in which specific objects are involved. When – we may make use of plaques, fireworks, doves, tee-shirts or anything else that bears the company logo. We may give each other some executive toy again with our company crest or livery as a formal gift; we might arrange a meeting in exotic location in which a whole panoply of in as the meeting of two tribes. But in the vast majority of transactions just three things are exchanged: the first is the good that is purchased, the second is the money with which it is purchased and the third is the receipt that records that purchase. Say you buy a book from me. You present the book you want to purchase at the cash desk, and offer some form of payment. Having rung the sale up on the cash register, I offer you a receipt. We have these three things – money, receipt and the purchase itself. We should take the thing-like quality of the money and receipt as seriously as the book itself. You leave with book and receipt. This book entered my bookshop accompanied with paperwork, a despatch note and invoice from the distributor and publisher. When you give the book to your sister you send it off to her along with a birthday card, so that she knows that the book is from you. Every commodity comes to us accompanied by the record of its provenance. Invoices, lading bills and all the other forms of record tell us where each thing is from, and are evidence that we got it legitimately and may legitimately pass its ownership on. The receipt is part of the technology and practices of record. But here is the new part – so is the book. This book is part of the technology and practices of record. This book marks the years of your
Paul Veyne Bread and Circuses p. 317
relationship with your sister. Even before that, it marked your, fleeting, relationship with me, the book store owner. Here I am offering you an account of our economic exchange that you are unlikely to have seen before. It is not only the receipt that records this relational event, but every single thing is employed by us to mark the relationships we enter. Each thing is a record. It is so because some set of people understand it in that way. The transaction and the relationship of which it was just one event, was recorded on both the ostensible records (receipt and all the other paperwork) and on the goods and gifts that are exchanged. This is so even if they are as immediately necessary and instantly consumed as a bottle of water on a hot day. The transaction is written on the memory of the witnessing community, the expert audience, defined by contract, itself defined by the apparatus of a tradition. The circulation of things Banknotes circulate, changing hands several times a day. Valuables circulate more slowly. People buy odd, apparently valueless, things in car-boot sales and sell them again years later. Social anthropologists are fascinated by such circulations. In the early twentieth century they were amazed by the traffic in yams and shells that spanned the archipelagos of the Pacific, a traffic which at first sight to be useless. Anthropologists understood that the yams were gifts in an economy of generosity between great men. But were these gifts, or were they transactions? Was this merely play or was it business? Why side of the modern economic account should they appear on? Each yam was accompanied by a recital of the many hands it has passed through, from which it gains value. It comes with an oral record of its many who have been in possession of it, a genealogy of members of the Kula ring. Each yam functions as a travelling logbook in which is recorded who received it from whom. The names of its holders are not recorded on it, but travel alongside it as oral tradition, its value rising as the details of its provenance lengthen. Each transfer is the occasion of the re-negotiation of a balance sheet of account between Big Men. The history, of which our transaction is just the latest episode, is a continuum. Each event of interaction stands complete with its history, contained in the materiality of this commodity. Each thing is just a record of its provenance. It is for us to ensure that that record remains readable, to us, and those who follow us. This is the purpose of labels and our financial record-keeping. The yam is a credit-history. It is an account of all the people through whose hands it has passed and so an account of the credit-worthiness of the man who holds it now. Many hugely influential people have held this yam, and this combines to give us the status of the present holder. What goes for the yam also goes for the multifarious media of account that we use in the modern economy. Few of these are so focussed and embodied in any one artefact. We only see such forms of value-embodiment at the top end of the market, provided by works of art. Each Picasso on the wall of the boardroom is a ‘yam’, or a banknote enlarged in order to communicate the prodigious worth of its holders. Money as abbreviated identity-giving and account-rendering Money is the means by which we give one another our approval. It is a mark of permission given. We give them licence to go on producing their account, as this is exemplified by the wares they are selling. Looks and glances are all the confirmation they need. As Pierre Bourdieu puts it: ‘Our acts mean more than we do. Our acts leave our intentions way behind.’4 But these looks and glances must have a ceremonial and ritual form, and these commodities and money together is that form.
Pierre Bourdieu Outline of a Theory of Practice p. 73
‘When population were smaller and less mobile, people got to know each other through participation in ceremonies, religious other otherwise, and decided how much they could trust one another. Trust is not only a tenet of civil society but an investment that facilitates trade. People learn to establish norms concerning contingencies, to settle feuds, and to enforce contracts, skills that serve beyond a single transaction.’ 5 The two parties exchange conviviality in the form of giving and receiving accounts of the world. Accounts are what is being exchanged. These accounts of the world also take an abbreviated form, so they appear in the two forms of telling (writing, the medium recognisable to the humanities), and of the abbreviated form, counting (the medium of finance recognisable to economics). The two parties to a transaction are swapping abbreviated accounts of the world. These accounts are not being given by one side and kept by the other side, but accounting is an act performed by two parties together. The numbering of the two parties is the modality of exchange and idiom of the hospitality of the firm. Money is what persons do: it is just talk, but as talk it accounts for the greater part of the linguistic medium in which Western persons subsist. The concept of a universal currency, and of exchange as a distinct and separate economic category relates to the idea of equivalence and the management of particularity. A universal medium can only obliterate what is particular to each encounter. As the instrument of this universal uniformity, money and the whole economy of financial discourse represent a particular idiom of human behaving, an idiom that understands all interaction as difference-reduction and control, and the enforcement of a single master idiom and economy. The market is a continuous world-wide conversation and money is the language in which it takes place. Though money represents a very constricted vocabulary, which through repetition, allows us to communicate a great number of options so that we do not need to repeat in full our account of the relationship between us. In small contracts we don’t need your full recitation of your business history to give us your value. We use figures, profit-and-loss accounts and balance sheets. Because the greatest part of credit networks consisted of masses of informal sales credit, which were maintained by the continued liquidity of such transactions, trust was considered the a crucial factor in buying and selling.6 We employ figures as a short-hand: they are an abridge the accounts we render in speech. With it we indicate how wide is the range of repetition of the relationships defined by previous contracts. Thus most transactions involve truncated exchange of accounts and valuations. ‘The purpose of keeping good accounts was not to see how much ‘capital’ the merchant had at any one time but rather to maintain his reputation for honesty and just dealing thus keeping chains of credit fluid.’ 7
Reuven Brenner Labyrinths of Prosperity: Economic Follies, Democratic Remedies (Ann Arbor: University of Michigan Press 1994) p. 148 6 Craig Muldrew The Economy of Obligation: The Culture of Credit and social relation in early modern England (Palgrave Macmillan 1998) p. 124 7 Craig Muldrew The Economy of Obligation: The Culture of Credit and social relation in early modern England (Palgrave Macmillan 1998) p. 128
Money exists not simply in those forms which anyone can identify as financial tokens. Only a tiny proportion of money has any tangible existence, as coin and banknotes. The majority of it exists as figures in financial statements, which only the numerate can interpret (M2, M3). ‘Accountancy practices (are)… a rule-governed kind of writing that tended to create what it purported to describe..’8 Money appears as bonds and a vast variety of promises to pay that only appear in financial reports and on balance sheets. The accountants have made their decisions, all of them controvertible, about which side of the balance sheet each item should appear, whether an asset or liability. Whether it is presented as the one or the other depends on the timing of financial reports, year ends and negotiations with the tax authorities. The auditor affirms that this is a true and fair account of the finances of the company and the shareholders meeting votes to accept it as such. Money appears in the events in which decisions are made which we call contracts. There is nothing between the two contracting parties, but accounts rendered in words, and rendered again in the figures that appear in financial reports. There are many forms of material and bodily interaction between us, but they are all shaped and controlled by words, and by the financial figures that are their abbreviation; these words are shaped and controlled by ritual involving many forms of material and bodily interaction. Not all communication between persons takes the form of speech. Our communication also has other forms of embodiment that we will examine in Chapter Six. Each economic agent, whether individual or firm, observes the market and registers who is doing best. Each is able to follow the series of relationships created by the most recent contracts. Each is glad to business with those who have been in the limelight and hopes to connect themselves to those who have secured the most visible recent contracts. All financial reporting and market gossip is a continuous rendering of accounts. It is not simply the liquidity recorded by a firm’s cash balances, nor solvency represented by its lines of credit, nor the strength of its balance sheet and annual report, but the whole cloud of gossip and rumour that twitches share prices minute by minute. The whole market ‘knows’ what that firm is worth for market opinion is weighing this very question as long as the market is open. Prices of stocks, bonds and currencies are averages of the individual views of market participants, and which are revised constantly as long as trading is in progress. Fundamentally, credit-lines exist in the head of every participant in that market. The formal records are no more than tokens of ‘what the market knows’. Each member of that market can say who is up and who down. It is the task of every participant in that market to know who has not been doing well and thus whose turn it is to prove themselves. The slacker’s credit is poor: everyone knows who the slacker is currently, and waits for them to exert themselves and demonstrate that they still have it in them to perform well. A settled market is cosy for its members, but perhaps in the long-run, those members as a whole make themselves forfeit their ability to respond when a set of more energetic market-makers burst in.
Mary Poovey A History of the Modern Fact: Problems of Knowledge in the Sciences of Wealth and Society (Chicago 1998) p. 56
‘A strong notion of reciprocity in exchanges and communal bonds of neighbourliness co-existed with the free movement of prices. It was through these numerous small, personal face-to-face acts of credit that agents interacted within the market…’ 9 Thus each member has to balance the demands of patience and impatience. They have to show some patience with the laggards, if they wish their fellows will patient when their own performance lags. Yet they must be eager to distinguish themselves from the laggards, and so insist that the laggard must lose his rating if he cannot proves himself. He who cannot prove himself will drop down the market to the point at which no one is interested in doing business with them; eventually it will be difficult for him to remain a member of the market at all. Thus every member of the market must strike the right balance between ambling along safely, not pushing too hard against other market participants, and attempting an unsustainable rate of progress that brings a more serious testing from aroused rivals. A market is based in the trust shared by its members: a minimum of trust is required just so that business ticks over. Again, this what is historians notice when they examine the markets with the perspective of centuries. ‘As households became more dependent on one another for their security through long chains of obligations, the combination of competition and dependence meant that they increasingly had to try to find a balance between hospitality, neighbourliness and charity on one hand, and thrift and profit on the other, because both were needed to keep credit alive and maintain the financial security of the household and commonwealth at one and the same time.’ 10 You need to have good stable relationships in order to enable business, but you also need to demonstrate your own virility.
3. Making unalterable
At centre of each transaction is a contract, a promise that must be kept. The contract may not be broken. But how can either of us be confident that the other will keep it? How can we trust one another? We have to spend enough time in one another’s presence for confidence to grow, and observing the procedures and performing the ritual by which people become sure of one another. ‘The first form of trust is methodical. Founded on routine or tradition it derives from the repetition of actions which bring trades to a successful conclusion.’11 We need to concoct an event of slow and deliberate public account-rendering and agreement. We need a meeting in which each of us gives our account of our possible future relationship. After much negotiation, first by our juniors and then face-to-face, we settle on a joint account which we have constructed together with detailed reference to the canons of agreement, contract law, specified by the precedent accumulated over years of profitable business built up by our industry. We have our lawyers and accountants working on it through the night. Our verbal agreement becomes a signed contract. We sign in a public event in which will Craig Muldrew The Economy of Obligation: The Culture of Credit and social relation in early modern England (Palgrave Macmillan 1998) p.124 10 Craig Muldrew The Economy of Obligation: The Culture of Credit and social relation in early modern England (Palgrave Macmillan 1998) p. 158
Michel Aglietta ‘Whence and Wither Money’ in The Future of Money (Organisation for Economic Co-operation and Development - OECD) p. 35
display our confidence in one another for the benefit of our investors. Our separate accounts of our identify in this moment converge to create this joint speech-act. Together we make big public gestures that indicate how hard and unchanging our relationship with one another now is. The negotiated then becomes the non-negotiable. If you and I sign a major contract we will do so in the offices of the legal firm or the bank that has arranged the financing. That firm of lawyers is backed by the authority its peers and Bar Council and the whole panoply of the Inns of Court and Appeal Courts, by which the judicial process communicates its absolute reliability to us. That bank is backed by the Bank of England, around which the headquarters of the banks cluster in the City of London. This proximity makes possible their mutual oversight and adds to the authority of each other of them, and so to the ability of these institution to lend their authority across the economy through their branches. People come from all corners of the globe to have their case heard in London because they reckon that here there is a better quality of justice; contracts made here tend to last because they are well-made. This justice is secured by the long tradition represented by this close clustering of legal and financial institutions. Each bank receives its authority from the whole company of banks, and it lends its authority to our contract, so that you and I are able to rely on this authority to finalise our contract. If our business is big enough, we will negotiate and sign our contract in the City of London Trust is economically quantifiable. It measurably affects both speed and cost, one way or the other. When trust is high, speed goes up and costs go down.12 When trust is missing we have to make expensive efforts to re-create it. Contracts depend on events in which persons come together in one place and time. We rehearse and practise and make opportunities for such events. Life in the City is made up of rounds of face-to-face meetings, and receptions, which are opportunities to meet without agenda, in which drinks will help us to all to unwind enough to show our hand a little. We need to see the other man’s body language, to drink in all the signals he emits, to decide on his sincerity through by reading the signals given by a hundred muscles in his face that reveal that he cannot force his eyes into the same smile as his mouth, to feel how sweaty his palm is. We will decide on the subliminal basis of these very physical and animal characteristics whether we trust him. ‘Trust... becomes incorporated into market practice through the repetition of business relationships. Its main infestations in this context, include keeping one’s word in financial dealings, the existence of a club mentality that creates mutual assurance, the acceptance of prudential standards in organised markets. ‘13 So we meet in the City of London. Location is important because it indicates our commitment to the particular account of the past, as good and unalterable, represented by this location, and by these bodies making a unique event in this location. Let us make this point in more picturesque terms. Let’s say that you and I want to make a contract. Each wants the other to appreciate its weight so that it is unthinkable that they would break it, no matter how difficult economic circumstances become. If we were children in the playground we would make each other swear on our mother’s life, or pledge eternal alliance by mixing blood smears. Here in the modern economy we have similar solemn ways of communicating – the absolute taboo of breaking of defaulting on contracts. We
Stephen Covey The Speed of Trust
Michel Aglietta ‘Whence and Wither Money’ in The Future of Money Organisation for conomic Co-operation and Development (OECD) p. 35
make them swear on something precious, indeed on everything that is most precious. We marshal all the symbols of great preciousness, and make them swear on that. Together we gather around, with our top men all present, together demonstrably and emphatically pointing out tokens of the solid and unyielding nature of contract. We do so by placing our hands on dense symbols of our past economic success. We grasp the past. What can we show one another, and make one another defer to but the past? Gold in the ground Let us say that we are in London, my town. Perhaps location will help us make this contract. It is as though we are swearing on the Bank of England. The Bank is a metonym for all the banks and for the centuries-long history of successful contracts that has made these banks what they are. Beneath the Bank of England are vaults of gold. We could place sums of gold there, and offer to forfeit them should we renege on our promise to one another. But of course we cannot raise such a sum of gold, and neither we nor anyone else can afford to place so much wealth out of circulation. So notionally at least we place our hands on the gold that is already in those vaults, and which is there as evidence of a vast number of earlier successful contracts, made over centuries. We make our contract there because this particular place has this established record for creating productive contracts. Ancient man buried artefacts of great value. When he buried his king he did so with all the panoply of his power, interring him with his sword and armour, and thus with the emblems of the military power by which he established political stability. His military power appears awesome, and thus it is highly crafted from precious metal, which more per ounce than we will earn in a lifetime. Did ancient societies worship at such burial sites? Or did they simply meet there to remind one another, and enforce on one another, the political stability that they associated with that king and the economic prosperity that stability enabled? Do we have to decide between a religious and a political explanation? Perhaps they brought their children here to this burial bound to tell them about this king, that stability, and about the penalties for breaking the peace. They meet around this hoard of regal bones and belongings, concealed in the ground beneath them. This combination of proximity with inaccessibility adds to the aura of irreversibility. The king created a gold hoard and so took that gold out of circulation. Why did he bury weapons and other valuables? Swords make threat and fear visible. To put this gold, jewellery or armour in the ground is not a waste. By this act, that creates this scarcity so that these swords and other items become more precious. By burying them, swords become more valuable as artefacts that display and broadcast his reputation. Then they serve to embody the achievement of previous generations and they become the capital which his subjects bank on. The afterlife that ancient people wished for their kings was surely the stability which that king established should continue so that the economy which we personified should remain live and valid for them.
‘In primitive society, institutionalised by ritual and sacrifice, there is no real money because desires for being are focused not on things but directly on other persons and their conduct. In a second era the monarch or sovereign emerges as a more stable institutionalised representative of the sacred excluded/elected victim: here money has a secondary status as reflecting the monarch and his sacred prerogatives. Finally in mercantile society, with the kind of long-distance exchange relations explored by Braudel, money escapes the control of the sovereign and becomes in itself the primary embodiment of wealth.’14
Michel Aglietta ‘Whence and Wither Money’ in The Future of Money (OECD).
This potlatch amplifies this story. Ancient man did not worship his ancestors any more than we worship ours. But we understand that doing things here in this locality, around the physical tokens of this story – the gold hoard – we create with all the magic that our performance can conjure a public event, that is an event in which the public becomes convinced that this contract and relationship is final and irreversible. The bank vault is a burial chamber; what has been buried here will not quickly be dug up. This treasure is valuable only because its burial makes it, its buriers hope, irreversibly unavailable. Irreversibility is what we are trying to achieve in our every contract, and it is the reason why we make those contracts that are important to us here, around the bank. What has been done here will not be reversed, which is precisely what we intend for our contract too. It is the public creation of reserves, of capital. The gold is our aide-memoire, technology of memory that allows us to create these embodiments of social capital.15 It is the approval of the whole audience – representing so much legal and financial expertise – that now gathers round as finally we sign our contract, that makes it a contract. It is final because this authoritative audience believes it is. The more nebulous contracts or covenants of the social and political realms have to be regularly – yearly – reinforced, in a memory-refreshing operation, in which the whole saga is repeated.16 The tokens of kingly power were buried in long barrows. Through centuries barrows gave way to palaces, basilicas and mausoleums, all the location which secures all our publicly made undertakings. Finally the long barrow developed into our central bank. To make the point more vividly still, we could say that our forebears act as witnesses to our contracts. We require their approval, and have to perform the correct and costly rituals to procure it, in order that the level of trust remains high. We do not explicitly revere, much less worship, our forebears, but we do respect and observe what the achievement that emerged through them for it represents an accumulation of social capital for us. It makes this City of London a good place for us to make our oaths and contracts. That so much social capital is already accumulated, so much case law available, that we do not need to create the foundations of our society and our economic contracting again. This accumulation of good practices allows for efficient repetition and represents a vast saving of energy. ‘Belief in symbols of sovereignty have yielded to conventional definitions of the unit of account. Trust has shifted from a quasi-religious belief towards the critical acceptance of the institutional capacity of controlling the flows of money.’ 17 Money is credit tokens, that is tokens of public permission, and these tokens are tokens of the existing stock of public permission. The people living in the British Isles became confident in their ability to make contracts that would hold. The British have traded with one another successfully enough to have become a
Michel Aglietta ‘Whence and Wither Money’ in The Future of Money Organisation for Economic Co-operation and Development (OECD) p. 66 ‘The electronic purse does not have the edge over fiduciary money, since fiduciary money offers non-pecuniary advantages of liquidity, anonymity and security that the electronic purse does not have.’ 16 Using a unit of account sets up a relationship between each economic agent and a the society of traders as a whole. It is not a contractual relationship between private agents. Providing a unit of account therefore amounts to providing a collective good. Michel Aglietta ‘Whence and Wither Money’ in The Future of Money Organisation for Economic Co-operation and Development (OECD) p. 66 17 Michel Aglietta ‘Whence and Wither Money’ in The Future of Money Organisation for Economic Co-operation and Development (OECD) p. 45
vibrant nation, and a growing economy. We trade on that large deposit of confidence and permission. Each time the inhabitants of these islands contract with one another a little is added to the total sum of British stock. A over the centuries a big mound of it has accumulated. Each pound sterling is a chunk of that large hill of that confidence that we take as the permission we seek. Each coin is a piece of this hill. That hill is made up of the accumulated events in which the rule of law have been honoured and publicly vindicated, and the unity of this people has been honoured and secured against threat. The hill is always leaching and crumbling as there are losses of confidence, and as enterprises and hopes fail to succeed, but so far the hill seems to be holding. If it is not growing, it has not noticeably diminished. Each coin is the history of all previous generations of our society. Imagine that in every transaction one of us gives the other a little stock of coins, of the metal refined from the ore of that mountain. Each time we buy and sell, we pay or are paid, as one of us passes these little metal discs mined from that hill, so the other. These tokens pass from one pair of hands to another. The two of us exchange by passing through our hands this miniature version of the sacred hill that is the accumulated past of the British nation. Money is the whole body of Western history, broken up into manageable chunks. We refer one another to that history by passing these coins around. A coin is the history-and-achievement of all previous generations of our society, in handy form. Money is valid as long as it is refreshed by continued reference to that whole tradition. In the long term we have to hope that we are not merely consuming and depleting that heap of capital, but also renewing and replacing what we consume and so leaving this pile of capital as big for our successors as we found it. In each transaction we call to witness the whole company of the British, past, present and future. Each of us wants the other hand to regard this act of ours as just as unalterable as that hill and the coin is solid. What want the other man to see the future as solid in the same way that the past, this accumulated past that stands as the hill of British achievement. The unalterable and therefore reliable nature of the contract refers to and depends on the solidity of the affirmation given by traders to traders in this place, and the solidity of that gold and this currency is a metonym for it. The accumulation of successful human convention secures our transaction, and those conventions are, we insist, as unchanging and non-negotiable as our history or as the earth itself. We trading on the good name of a country, and so on the confidence that its history will continue to give us an equally settled and prosperous future. In the next chapter I will suggest that this passing of the metal of the British ‘hill’ from hand to hand is a token of our unalterably, non-negotiable setting on earth. The unyielding givenness of the world is both here before us, and we impose this recognition of it on one another and so it is constituted by us.18
The account I have sketched here combines the two concepts of metallism and cartelists. Charles A.E. Goodhart ‘Two Concepts of Money’ in Geoffrey K. Ingham Concepts of Money (Edward Elgar 2005) p. 441 ‘There has been a continuing debate between those who argue that the use of currency was based essentially on the power of the issuing authority (cartalists) - ie that currency becomes money primarily because the coins (or monetary instruments more widely) are struck with the insignia of sovereignty, and not so much because they happen to be gold, silver and copper, (or later of paper) – and those who argue that the value of the backing of that currency, (Metallists). A conjoint debate exists between those who have argued that money evolved as a private sector, market-oriented, response to overcome the transaction costs inherent in barter, (let us call
A society is sound to the extent that it knows that not everything can be dug up and cashed in. Though our fixed capital lies deep in the ground of our past, it is not unproductive and we cannot render it productive by digging it up. It is not a mineral ore that can be extracted until it is exhausted but a reservoir that must always be there and be allowed to fill again so that it will always be there for us to draw on. It will fill again as long as a healthy society generates the social capital that trickles back down to that aquifer. This reservoir supplies our society and economy with the great mass of deep commonalities and motives that must be assumed but which cannot be made explicit, and which we can sum up as ‘trust’. But we cannot put a price on the resource represented by this reservoir. For what is tacit and implicit is the basis on which other values can be made explicit, and so allows us to put a price on them. Economic transactions depend on us, our initiative, motivation and perseverance, and so they are ‘soft’; and they depend a vast accumulation of successful past economic event which, since it is past, is unchanging and ‘hard’. The aim of all economic transacting is continuation. We act in the hope that there will be transactions and an economy in the future. Both materiality and convention, the ‘hard’ and the ‘soft’, are required; there may be change and growth but there must be continuity and stability. Every transaction is based on a balance between sameness and difference; too much ‘difference’, whether we call it ‘change’ or ‘growth’, puts continuity into doubt. A curious conceptual anomaly creates a bias that promotes difference over sameness, at the foundation of modern economics, which means that it gives poor description of actual macro-economic changes. All other things being equal, a thing remains the same: something changes only when it is affected by something else. It is therefore normal that things stay as they are, and it is a departure from the norm when they change. Next we must sketch the deep connections in their relationship between money and change. Then we will be able to ask whether the assumption that growth must be a normal feature of our economy makes our economy unstable.
4. Growth and Money’s modern origins
The driving narrative of modernity is growth. But it has cast off the thought that persons can grow and that they may freely take on any course of formation by which they could do so. ‘Growth’ means only not personal growth but merely material growth, a rising standard of living. We have to compare two accounts of growth, one of which relates to an account of persons, while the other is unrelated to persons, and within this second account, that is offered by modern economics, in which money and growth are deeply connected, at the level of logic. What is growth? In Chapter Three we compared two accounts of man as an economic agent. On the one hand he was a public being, who acted before his peers, and on the other he was a private being who acted without an audience. The moral philosophers who affirmed this account of man as private and solitary insisted that man was already mature. This man did not need to grow because he already was all that he possibly could be. He stood at the summit of perfection, and the only limit on him was formed by those who did not see this so. According to these thinkers, the individual man could grow by allowing his own innate character to emerge from within him, as simply as a seedling unfurls out of its seed pod, almost without inputs. For this growth, such an individual did not need
them Mengerians), and those who again argue that the State has generally played a central role in the evolution and use of money (Cartalists).’
any other human being for he had no need to undergo any course of formation at the hands of others. In the Christian account of grow we grow as persons as we grow towards other persons. We may grow towards that maturity through a prolonged process of recognition that other persons as ultimate. We are enabled to recognise one another as gifts, who come to us without any effort of our own, by the grace that comes from God, and as also as our goal, whom we have to want to come to know. We can love one another and find our true satisfaction in one another, through God. The love of God for man is the source of all human loves, whether proper or improper, and God is the destination of all human loves. We may grow as persons through an apprenticeship by which we may acquire good practices and virtue. The long Christian tradition contains the resources for an economics which was not based solely in material growth, but primary in personal growth, which is to say, the growth of persons. Growth is not a matter of the value of goods traded or number of transactions, but relates to a population, its motivations and all those intangibles which we have called alternately ‘culture’ and ‘social capital’. I suggested that Modernity represents our attempt to withdraw from a close involvement with other persons and thick description of our social life. The Christian tradition regards economics as a matter of learning to make good judgments about what is valuable. From it we can re-discover the insights of other ages which also regarded economics as a matter of decision-making and of making good decisions, when economics was inseparable from moral and political economy. We may grow as persons; our aim is not that we become more than persons, but that we become more truly persons. We may recover the conceptuality by which we can judge and acquire those skills by which the community says what is true and good, and becomes an articulate and political community, in which alone persons are encouraged to grow to maturity. Only persons can judge what is the good life. We are embodied persons. Our bodies and material needs arise for us persons and are not independent of them. We need bodies because they are the means by which we are present to one another and so are public beings. Persons cannot be separated from bodies, and bodies cannot be separated from persons. Yet modern economics does indeed try to separate the two and to understand them in separation from one another. If ‘Growth’ means only material growth, rather than personal growth, it refers to a rising standard of living. But how should we assess this when we have given up the criteria by which we can decide between differing measures by which to assess any standard of living? We are left with Gross Domestic Product (GDP), which is to say, the sum of monetised transactions in any national economy. The ‘economics of happiness’ suggests that more choice and greater access to material goods is as likely to bring dissatisfaction as contentment where the economy is entirely detached from the self-government of the particular person.19 In an economy dedicated to an account of growth as material growth, unrelated to the growth of persons, three factors grow. Money grows, debt grows, and the consumption of resources grows. First, as the economy grows, so does the level of indebtedness. Debt has to be repaid and since there is always a question about whether it will be repaid, debt brings a fragility to an economy. Moreover as the economy grows, and money grows, so does the split between the body and the person , and so between material growth and our development as persons. We have to ask whether material growth simply represents a division between
Frey The Economics of Happiness
ourselves considered as bodies (needs and wants, and so the demand side of the economy) and ourselves considered as persons. Modern economists are the heirs and successors of the modern champions of autonomy and so of the expansive period of European and American empires, that lasted from the seventeenth to twentieth centuries.20 For them economics can only be about growth, and material growth. Such growth is related to the growth of money. So we must turn next to the creation of money. Governments and banks Where does money come from? Here is a thumb-nail sketch. Wealthy men corresponded and did business with one another by letter, and expect that the bearer of the letter would amplify and interpret what the letter contained when he reached its recipient. Money is a form of letter. The wealthy wrote letters of introduction which the bearer could present as they travelled to other noble houses. Such a letter functioned as a passport through foreign territory and as their introduction to polite society. Within a great house such letters functioned a chit or requisition slip, instructing the kitchen or stores to provide whatever its bearer required. 21 A letter of recommendation, became letters of credit, and a letter of credit became a cheques which could be drawn on that man’s resources, and by extension on those resources held for him, or lent to him, by his banker.22 Such letters functioned as money, or to put it another way, ‘money’ is our term for the sort of letter that functions as a passport or requisition slip. Money is a form of writing. Every kind of monetary token also relied on some kind of writing to enable it to serve the three functions that money had to perform, this writing might be as simple as the inscription on the face of coin, where the writing typically shared the space with images; or it might be complex and not confined to the monetary instrument at all.23 But as Mary Poovery points out, ‘money has become so familiar that its writing has seemed to disappear and it has seemed to lose its history as (various forms of) writing.’24 In the British Isles only parliament had the authority to raise taxes from the country, and practically, its members has the ability to do so. A king who determined to avoid parliament could perhaps meet his obligations for a while by borrowing from his own aristocracy, or from the City of London or from bankers. He might consider it better to borrow from, and be in hock to, those outside the political nation, without military power or dynastic claims of their own, such as the Church, Jews, Lombards, Dutch. Since they could not so easily enforce the payment, these could be defaulted on in extremis, and carry the blame for
See Scott B. Macdonald and Albert L. Gastman A History of Credit and Power in the Western World (New Brunswick; Transaction 2001) p. 127-51. John Brewer The Sinews of Power: War, Money and the English State 1688-1783 (NY Alfred Knopf 1989) pp. 18589; Andrews Kenneth Trade Plunder and Settlement: Maritime Enterprise and the Genesis of the British Empire 1480-1630 (CUP 1984) 21 Valenze Deborah The Social Life of Money in the English Past (Cambridge University Press 2006) p. 49 ‘They also learned to approach the act of exchange with an eye to both the past and future values of certain items, understanding that in some case the ‘store of wealth’ represented by money might change over time’ 22 Bruce Carruthers City of Capital pp. 127-31.
Mary Poovey Genres of the Credit Economy: Mediating Value in Eighteenth and Nineteenth Century Britain (Chicago 2008) p. 59. 24 Mary Poovey Genres of the Credit Economy: Mediating Value in Eighteenth and Nineteenth Century Britain (Chicago 2008) p. 3
difficult economic times. All money was understood as a form of promissory note: the note is as good as its issuer, and the other agents in the market who accept it. Each seller critically examined the payment he was offered not merely in terms of its quantity, whether the sum offered was enough in its nominal value, but also its quality.25 No one assumed that all money was the same, for there was no single authority that took on the responsibility for ensuring money’s uniformity. 26 Money and government Where does money come from? Money is created by states. The government creates money and it does so by fiat, that is, simply by declaring that ‘this’ is money. It rules out attempts to make anything else serve as money and so makes its money sole valid currency. Government is simply is our communal and national agreement to trade with one another and uphold the conditions – justice – in which we may do so. No nation, and no national government, has to buy or borrow money; it has the authority to issue its own money, for there is no source with more authority that the consent of the whole people which that government serves. The government is dedicated to the service of the whole society and can provide for that society whatever range of public services they require. It declares that such-and-such is legal tender, and it thereby bring money into existence, for the whole people and on their behalf. That money is intended to facilitate the transactions that they will want to enter. Money is a metric, like other weights and measures. A government can provide this particular metric just as it provides us with laws and a legal system that enforces them. It can declare that certain weights and measures are legal, and others are not. The historical origins of our form of money is as a specific measure of weight – of precious metal. Governments create money by minting coins and printing paper currency. These give us the small denominations in which to make many small transactions. On a larger scale government makes money by making entries in its own national bank account, and most money exists only as the numbers recorded in bank ledgers. The money that the state produces is money because the population agrees that it is so, and this money will be tried by the international money markets. Some economies use other reserve currencies for international trade and perhaps if they find own local currency inadequate also use foreign currencies for domestic exchanges. It is the affirmation of these economic agents, given by their use of it, that makes it money. There are always many things in circulation that act like money; most of them are ephemeral, like coupons, vouchers, store cards, cigarettes and bottles of whiskey. Any firm, or community or indeed individual may issue their own coupons and have some success in getting them accepted and a circulation of them established. But since the government does not accept
Mary Poovey Genres of the Credit Economy: Mediating Value in Eighteenth and Nineteenth Century Britain (Chicago 2008) p. 58-9 ‘Forced to adapt to the presence of multiple kinds of coin of uncertain worth, early modern Britons developed great virtuosity in exchange relations that enabled them to evaluate a great variety of coins by weight, ‘chink’, color, thickness and to decide when and how to deploy better and less good coins and to determine which coins should be hoarded and which ones paid away. 26 Mary Poovey Genres of the Credit Economy: Mediating Value in Eighteenth and Nineteenth Century Britain (Chicago 2008) p. 162 ‘As long as competing kinds of paper credit circulated, and as long as no one – not even the Bank of England – took responsible from controlling the nation’s currency, paper money remained controversial. No credit money could be taken from granted in other words because every banknote was as subject to evaluation in relation to notes of competing banks as every bill of exchange always was… all notes would compete with each other and would remain objects of cultural scrutiny.’
such scrip for the payment of taxes, it does not have the sanction of law that makes it ‘legal tender’. State and banks Bank-issued money as failure of government authority But this is not yet an adequate account of where our money comes from. For the majority of our money is not made by government fiat. Granted, governments do mint coin and print bank notes, but these represent only 3% of the money presently in circulation in the UK. If government-created money is just a tiny fraction of the ‘money’ in circulation, where does the rest appear from? All the rest is debt, used as money. Most of what we employ as money is debt, albeit that when it passes through our hands it is indistinguishable from non-debt money. How did this come about? Those in power in any government can be expected to know that the whole people, and traditions of the people, is the source of their authority to government, and that they therefore have the authority to issue by fiat the enough money to enable trade in that nation. But what if those in power do not comprehend that this authority is theirs to exercise, and do not have the confidence to issue fiat money? As they became more impressed by the authority of bankers, and their confidence in their representative powers fell, so they allowed the proportion of government-issued money to fall, throughout the eighteenth and nineteenth centuries, until it stands as its present negligible proportion. But national governments did not maintain the level of fiat money, but allowed banker-issued money to take its place.27 Instead of issuing it, our governments allow other bodies to issue money, which the government then borrows from them. So it is that most of our money is not issued by governments, but by other institutions, banks, which over time governments have allowed to take on that role until they effectively hold this as their right. By default and over centuries governments have conceded this right to them. They condone this arrangement because this money comes back to them as taxes. Central banks are not branches of government: the Bank of England operates under royal charter, while the American Federal Reserve Bank is owned by the banks themselves: both are able to resist accountability to their legislatures. Individual persons take out loans from banks in order to invest in their enterprises. It is the job of the bank to identify those who will make good productive use of this money. It is there to select real entrepreneurs who will identify new commercial opportunities, make new productive capacity and create new industries, technologies and jobs, from those who will not. It is their job to separate the long-termers from the short-termers, the investors from the speculators. The central bank out-sources this job to the banks, for on it relies the quality of money. For it we issue money, through loans, to those who will make no productive use of it the economy will be worth less rather than more. Money is issued in order to enable future transactions, but it could turn out that we have more money, but less economic activity and thus less real wealth, than we anticipated. All money is seed money: it has to be properly placed in the economy in order to create the growth that it is intended to manifest. Badlyplaced money will not deliver the looked for quantity of transactions. The money that was created to enable the large number of transactions of a growing economy will only very inefficiently enable the smaller number of transactions of a shrinking economy. Too much money and too few transactions will cause dislocations of resources that will make that economy smaller yet.
Ellen Hodgson Brown Web of Debt
To make a good money supply is not merely a matter of the central bank deciding how much money the economy needs for the coming period. It is also about every bank deciding which of the applicants for funds who come before them are most likely to be a good investment. Which of these borrowers is likely to be a good economic multiplier because they understand that this money is seed money? They have to exercise their judgment and to decide that this applicant is feckless but this one competent and responsible. They have to distinguish between investment that is productive and which is going to be spent on consumption. Money represents a judgment on the future character of the economy. It is not just the one central decision by the central bank, but the myriad decisions of banks and other investors that keeps the money supply healthy. Money is not simply constituted by the decision of one central authority, but of many, many decisions by different agencies, exercising their representative function across the market, and ultimately it is constituted by the market as a whole. This means that it is not simply a technical decision, but a decision about character and deserts and so a moral decision. Anyone who takes out a mortgage brings new money into existence. Despite our conviction that we are borrowing money from the bank, the amount of your loan was not given to you by the bank, for it did not exist until you went into the bank. The bank entered a covenant with you by which you are putting money into the economy. You spend money, for example, paying the seller of the house you now buy, and buying the services of the suppliers and tradesmen who refurbish it for you. As you pay them, they are able to pay others, and the money that has been brought into existence by your mortgage spreads through the economy, indistinguishable from any other money. You and your bank have brought this money itself existence together, for each bank is licensed by the central bank to exercise this function of issuing money against the surety of your future labour and the asset that is your house. We can put this another way. When you go to a bank for a mortgage, the bank gives you permission to issue IOU’s, in just the way it is given authority to issue IOUs by the central bank. These IOUs will appear as pounds sterling, in all respects indistinguishable from all other money in circulation, except that you owe the bank interest on them. The pounds in circulation are IOU’s issued jointly by individual mortgagees and their banks. When you borrow money by taking out a mortgage, it is as if you yourself become a bank, lending to everyone from whom you make purchases. You are passing on to them your IOU’s, granted the status of pounds by the bank, and for everyone downstream of you, your IOUs will be hard currency. As soon as we take any of these pounds from the cash machine, they appear as the banknotes issued (or guaranteed) by the Bank of England, with all the panoply of the familiar portraits and features that identify this as the national currency of the sovereign nation. For you, however, they will be debt bondage, the commitment to produce 200% of the amount of your mortgage over the next twenty-five years. The loans taken out by individuals and corporations are the currency that serves a whole economy by financing every transaction in it. People bring money into being as they take on debt. By taking on debts money comes into existence. When you pay off that mortgage and no longer owe the bank, that money has gone out of existence and the total money in circulation has shrunk correspondingly. It is only the appearance of more people coming to borrow that prevents the total amount of money from diminishing. If people did not take on new debts, there would not be enough money to enable transactions to take place. We all rely on other people to go into debt in order that we have the money by which we can buy and sell. The whole economy, and every agent in it, needs this money and rely on people to go into debt. Yet we put the onus of
its creation on the one individual: transaction costs are invisibly transferred to those who are in debt. As long as money is created by one particular section of the community, the banks, and so reckoned to belong to them (our mortgage appears as an asset on their balance sheet) money comes with this spin that skews all subsequent economic relationships. Once started, that captivity can only spread. An asymmetry, that creates an entirely unnecessary status differentials everywhere in the economy. It inserts a differential into every relationship that need not be there. This has the effect of separating the economy into creditors, at the top, and debtors at the bottom. Whether we consider it as credit or debt, it polarises. The state that does not acknowledge its own sources does not know its own authority. The source of its authority is the whole people, past and future as much as present; it has a mandate to issue money for the whole economy, not only present but future. The state that does not acknowledge that it receives its authority from the whole people does not serve that whole people equally. There is no need for governments to seek take their authority from the banking industry or any other oligopoly.28 But government is content with the way things are, perhaps because those at the top of governments are unable to believe that they can create by the fiat the money by which they themselves should be paid. By relinquishing to banks the power to create money, banks take on a disproportionate power that distorts the economy. Perhaps we should charge members of government with not governing with enough confidence. Surely there is another way? Indeed, there are many. There are many movements for money reform, particularly when, as now, the existing system comes into crisis.29 We do not need to issue money in the form of debt. Money can simply be issued by fiat. Each state can issue fiat money. There are forms of money and its issuance which do not involve central banks. Perhaps we do not need a fractional reserve banking system at all. We need a clearing system, or many such systems. We do not need the currency of one country, the United States to function as international currency, with the effect of keeping the US in yawning deficit. We could see the emergence of a global currency, in which international trade could be carried out. Indeed currencies could be traded without the involvement of states defending ‘their’ currencies, in the same way that shares are traded now.
5. Debt and growth
We have seen that money is related to debt. Now we must relate debt to growth. The modern origins of money in debt have resulted in repeated crises, but though there have been national and international collapses, the global economy has survived. It has been possible for debt money to continue to grow because the world economy grew. It did so because Europeans discovered new territories, regularly finding that the horizon was further away than they had believed. The world was bigger than their forebears had known and much emptier than their own continent. For Europeans the world appeared to be expanding. Europeans sailed across the Atlantic and took possession of the vast lands of north and south America, discovering the resources that enables the growth of the population and that powered the greater prosperity of those populations. The imperial age – the period of the East India Company and Hudson Bay Company – was the result of this territorial expansion and discovery of new resources and trading partners. The age of the open frontier and of empires is the founding
Ellen Brown The Web of Debt
Bernard Lietauer The Future of Money, James Robertson; Greco, Douthwaite.
period for Modernity. The economic mechanism that the champions of the autonomous economy required this open frontier, these new material resources and markets, and made it the foundation of its self-understanding. Modern economics is premised on this expansion. Modernity is inseparable from growth. In earlier centuries, growth was indeed possible. There were repeated national and international crises and collapses, which impoverished a proportion of the population, but nonetheless these were intermissions in the growth. There are always crises in capitalism, but these are essentially corrections, and they are bigger and more painful when we attempt to prevent them. Our question must be whether it is still possible to run a system in which there must be constant growth. Debt and interest We are all in debt. But we are in debt to one another. Surely we could simply write off our debts to one another? Not quite. For we not only owe the capital but also the interest we have undertaken to pay on it. The debit and credit sides of the global economy do not equal one. Modern economics works on the assumption that if we got rid of money our economic exchanges would continue as before without it. The requirement of interest payment means that this is not so. 30 We owe interest. Each of us has to pay back more than we borrowed, which means that each of us has to come up with more money than we borrowed. We have to work to find that money. By lending we set someone to work, and when we all lend to and borrow from one another, we drive everyone to work. Because they have to pay interest in additional to the capital, the world’s borrowers have to find more money than presently exists. The total debt is the same as the total credit, but the total debt plus the interest – that sum is greater than all the money in existence. In order that all capital repayments and interest payments can be made, the amount of money in existence has to grow. Since money is (very largely) the same as debt, this means that the total amount of debt owed has to continue to grow in order that we call all meet our present re-payments. There has to be growth in the total amount of money, and we have to increase our supply of money by new debt in order to pay off this interest. What is the work that we drive one another to do? Our work must consist in inducing other people to take on new debts. We are all engaged in encouraging other people to borrow in order to put more money into the economy and raise demand so that we can all come up with the money to meet the interest payments on our own loans. The chief work of the modern economic agent is to expand the money supply. There is not yet enough money in circulation to pay everybody off, along with interest. But we can only bring more money into circulation by creating new debts. We all need to make sales in order to pay off our own debts so we hurry to secure new sales. It is not enough for everybody to trade with one another at the present rate. There has to be economic growth in order to generate the money with which we are going to meet the interest payments on our present borrowing. There is an imperative to keep growing the economy irrespective of human need or environmental consequences in order to stimulate sufficient new borrowing to put enough money into circulation
Steve Keen Debunking Economics
When we create money as debt we are assuming that the economy as a whole will expand. All the balance sheets that represent the present state of the economy, can only be justified on the basis that the future economy will be bigger. The economy has to get bigger in order to repay the loans that appear as assets on other people’s balance sheets. More resources have to be found and consumed to create this bigger economy, and this is so even though the world itself is not going to get any bigger. If the future economy is not bigger, our loans will not be repaid, we are making claims about our assets that are not true and the present economy is already bankrupt. If we make less this year than last we are all in trouble because we have to make our interest payments. If we start missing payments because we can't find enough business because there is less money in circulation, we will have to find a significantly greater sum in the following period and so will quickly be in much deeper debt. Interest is compound, so our debt can spiral beyond our ability to pay. Eventually we can no longer disguise from one another that the money we are owed will never be repaid, the assets disappear from our balance sheets. The economy is not in equilibrium, but in a perpetual state of overreach, toppling forward into the future. When it suddenly becomes clear that that future is smaller than we all said it would be, we have a crash.31 Inflation and deflation The way that we define money means that we are hurling ourselves against the limits of a finite world. Debt and compound interest commits us to trade faster. Without the need to make repayments on our debt we would be satisfied with achieving fewer transactions. We would have less need to pressure others to make formal acknowledgement of each service we render them, by paying us individually for them. More of our accounting could remain informal. We would not be looking for new ways to bill one another for services that used to be understood, and which involved no invoice. The system which employs debt as money, and requires growth to pay the interest on that debt, inevitably faces crises. Compound interest means that debt grows faster than the real economy ever can. Productivity may grow geometrically, but debt grows exponentially. When we fail to make our repayment, our debt climbs steeply, and finally vertically. People cannot pay what they owe, and thus there are defaults. As a result of the way that we define money by this relation to debt, interest and growth, gap between geometrical and exponential growth means that money periodically goes into crisis. Will the global economy meet a crisis it cannot overcome? When nations cannot meet their national debt interest payments, they create more money and run inflation. Inflation is not caused by too much money but by the lack of permanent stable money stock and our reliance on debt-money. 32 Inflation is the result of the two sides of the economy – consumers and producers, wages and prices – in permanent conflict because of a lack of purchasing power. The result of debt-money is that there is under-payment, and so not enough money in the economy, so individuals do not have enough money to enter exchanges, and thus cannot buy even basic needs.33 It is often assumed that inflation has to be brought down by taking money out of the system, but when this is done a sudden shortage of money is created, there is a drop in the number of transactions, which is disastrous for those at the bottom. Once people
31 32 33
Richard Rowbotham (292)
drop out of the economy, it may not be easy for them to get in again later, so deflation may cause a permanent loss of demand. Inflation is a great de-motivator. It saps away savings and so dispossesses those who have worked, so that those who have worked have no greater reward than those who have not, and are unable either to look after themselves or have anything left over for anyone else. Inflation destroys the independent selfsubsistent individual and family and draws people into closer dependence on government. We are eager to earn money in order to provide for our old age. Our determination to accumulate a capital sum represents our fear that whoever is prepared to look after us when we are old, will demand more than we can pay. We said that the money supply has grown much more rapidly than is warranted by growth in the real economy. This inflation of the money stock reflects the fact that there are already more old savers than young borrowers. But more than that, it reflect the fear of the majority of those savers that, despite their saving and virtue, and despite their successful speculation, they still do not have enough money to ensure that that they will be looked after in their old age. Money expresses our fear of the gap between retirement and life’s end. The long growth of the money supply in Western economies and boom in the financial services are the result of this fear that each of us feels that we need more money in order to pay for our retirement and old age care. We need more money than we are able to save from our earnings. The years ahead each of us will need a family about us again to wipe our chin without charging us for it, but we have long since allowed that family to break up as an economic entity. It is not there to provide inter-generational care. The distended financial services and ballooned money supply are here because the family is not. The driver of the capital market The capital markets are about the efficient, that is the best, allocation of resources, so that resources go to those who can make best use of them, and best use means the use that will generate most new economic growth, so that it acts as seed money, getting the highest multiplier, so the whole economy is bigger as a result. We want returns that led to more returns that lead to still more returns – that is what we are looking for. We need the capital markets to serve the productive economy by providing the best allocation of resources to its various industries. It is the job of financiers to assess which seem likeliest to surge ahead and to put money there. But they are having the reverse effect. The capital markets are attracting money away from long-term investment in productive industries, taking money out of production and into the reservoir of money that is guessing where to go next – and of course it goes where it think that all other money will go next. It would be most efficient if we simply assigned money from the wealthier to the least well off, for the least well-off will always we better spenders, that is, more productive, spenders than the wealthy. For the first few pounds you spend, on essentials, have a greater multiplier effect than the last few pounds. But money is going to the richer, who put it into speculation into asset prices, that is, they are pushing up the prices of commodities thereby making it more difficult for those not well-off to put those commodities or assets into production, to make produce (multiplier effect) use of them Fear, greed and speculation We have said that each of us is driven by anxiety to make themselves secure so that they can afford the care that they need. There are no natural limits to this
need for care, of course, so . the market is driven by those who have achieved least serenity in the face of their own mortality. The angry and desperate are the front of every market. The game is to plunge into every game and market just before the majority plunge in behind them and to get out again before they stop plunging in. Some ‘market-makers’ manage to create rushes into particular stocks and sectors, just by getting into them, and just by talking certain areas up. So the market is a competition to talk certain areas up (ramping up the price), without revealing that you are in those areas and trying to get out again. The market is like a crowd of children rushing across the playground. As long as you are in just ahead of the average more often than not, you are winning. You are trying to spook others out of the game you are not in, and into the game you are in, in order to dump your shares on them, meanwhile others are trying to spook the market you are in, and you are weighing up whether it is worth holding your nerve or whether you should take a loss and get out before the position deteriorates. The old game of selling and talking down a stock, in order to buy it again when the price has dropped, is accelerated by automated dealing; here the institutions with the greatest data-processing power are fastest, able to identify and complete trades in fractions of a second, benefit at the expense of all others by selling and re-buying your shares in that stock at a lower price. The market sometimes reduces the feverishness of a myriad individual emotions, alternating between confidence and caution. At other times, the market amplifies the sum of the individual experiences and exacerbates our individual panic. But there is always an inner circle, the tapeworm that eats away at the body politic from within, as one commentator refers to it.34 The bigger, full-time, investors or players are winning at the expense of the small investors, selling them stocks that they are moving out of, or repeatedly moving in and out of, pushing the price down. The insiders are milking the outsiders, the smarter are gulling and fleecing the fools, and perhaps it has always been that way. But we see a new burst of such activity, in particular which we see that the very biggest players have captured the state and are engaged in its pillage, we should say so. If we are seeing an inexorable concentration of control over real wealth, this would result in a significant loss of economic motivation.35 In particular it is for Christians to put these questions.
6. Recovery and restraint
We have created a vast excess of money over actual economic growth. Though one bubble appeared to burst in the financial crisis of 2008, our leading banks and central banks have been preventing the deflation that should have occurred. Governments have been created new money and preventing any major correction. The healthy thing would be to let market – which is the assembly of mankind – decide values. If a bank or corporation or indeed whole nation is bankrupt, the market should be allowed to discover this and re- value its stock. It is good to let this happen, it is damaging as long as we delay this correction, and this correction is in the long term inevitable. Stock market crashes might seem to make us poorer and so be thought to be avoided at all costs. But they are only apparently so. We have lost money, but that money was long-term social capital cashed in by the many individuals seeking to distance themselves from their inherited contexts. When the money is gone we have to return to that more primitive economic form, the domestic household. We are all still stuck in a much large bubble, that will persist for as long as we do not value two factors at their replacement value at least. One of
Solari Catherine Fitts – Solari
these factors is the entity that reproduces and motivates the next generation of economic agents, the family. The other is energy. We said in chapter 3 that the long-term functioning of the economy depends on a basis level of national unity, endangered by excessive disparities of wealth. A crash may be a revelation of essentials that enables us to discover that is permanently valuable. Perhaps what we took to be our economic prosperity is not the result of our own productivity, but simply a credit-created delusion. If it disappears, perhaps we will be much poorer, or perhaps we will only discover that we have been living a long way above our real, earned and sustainable standard of living. JS Mill points out that a crash is not the destruction of value, but the revelation that value has already been corroded away. After all, when we lose all our money, do we not become more directly and personally dependent on one another again? Don't we go back to our families and eat humble pie? Perhaps we might experience this discovery of our economic reality not as poverty but simply as a relief. We have seen that since money is brought into existence by loans on which interest is paid, the number of relationships in which one side must recognise the service of the other in the explicit currency that we know as money. The economy denominated by money grows as we opt out of the specific relationships of family, household, local and national communities and industry, and into the abstract, distant and global relationships. But first there is another factor to consider, the limits of the material world. Could it be that the real bubble has not yet burst? Could it perhaps be that little of the growth that we have experienced in the last fifty years will turn out to be real and sustainable? Perhaps we are all riding a ‘super-bubble’.36 Is there a much bigger correction ahead? The limits and sustainability of growth We have not addressed the issue of how this near-exponential growth in global capital relates to the finite resources. Can the economy grow when some basic natural resources, chiefly fossil fuels, not only do not grow, indeed actually deplete? Can we continue to have growth in a finite world? We said that the modern conception of growth as material growth was dependent on continuous expansion. The effective frontier remained open through the twentieth century because we discovered oil. It made long-distance transport possible and transport costs so minimal that the world became single global economy. Distance was abolished, and every place became the immediate neighbour of every other place. Debt and our obligation to pay compound interest, a compulsion to seek the most immediate opportunity, regardless of how short-term. We extract material resources from the ground. The pumped oil that gives us the plastics, and the mine that produces us the rare metals required for the electronics, brought together in a factory in China, brought by container ship to our shopping centre, where I purchase it. It then has a couple of year’s life in my front room. Then it goes into my garage and from there to the dump and landfill. Each industry attempts to externalise the costs onto the common purse or environment. This looks like a commitment to denude the earth as quickly as we can.
Niall Ferguson The Ascent of Money pp. 342 ‘It may even be that we are living through the of a deflation of multi-decade ‘super bubble’.’
Energy What makes the economy go round is energy. Cheap oil has allowed us to replace labour. Some labour allows particular industrial communities to develop their own particular dignity, and that to separate ourselves from labour entirely would be to forfeit the particularity of relationships by which different groups serve the good of the whole. ‘Labour-saving’ may mean ‘man-replacing’, which leaves sections of our population without employment or dignity. Have we been spending our engineering effort to supporting the wish of each of us to act as an individual without responsibility to the next generation? Have we employed technology to avoid learning to exercise self-restraint. Has the flight from the discourse of morality that I described in chapter Three been enabled by technology and reckless expenditure of oil? Our unwillingness to discuss what is good, the abdication moral discourse and unconditional turn to the technology that empowers consumption means that we have surrendered ourselves to one particular appetite, our appetite for oil. We have looked for a technological ‘solution’ to every inter-personal and relational problem, so that we do not have to deal with our responsibilities and find the virtue to do so.37 Our dependence on oil represents our flight from individual industry into indolence. Oil is used by every other industry. As the global market marginalises subsistence production, world food production has become dependent on a small number of crop species, production of which is dependent on the inputs of fertiliser and pesticides manufactured from oil. As oil becomes expensive, so does everything else. Will a rising oil price make these inputs and the agriculture that depends on them more expensive, putting them out of the financial reach for the poor? Ecological issues are assuredly also economic ones. Water scarcity means that land ceases to be productive and able to support a population; crop failures will speed up the flight to the cities. Will this process further reduce the number of subsistence farmers, and endanger the resilience they represent who once grew a wider a more sustainable range of crops. As refugee populations attempt to move around the world, these will translate into political problems. As the oil that is available become more difficult to reach, we need more technology to reach it, technology which itself needs more energy. Oil is required for the extraction of oil (‘energy returned on energy invested’ - EROEI). This means that less of the oil we pump is available for our use in other industries. Yet we will want to dedicate a proportion of our present energy supply to look for oil’s replacements. We would have employ a significant proportion of our present oil into finding a replacement source of energy (hydrogen, cold fusion). Yet we are consuming all the oil we drill just to maintain the economy at its present level. Where will the extra energy resources come from that create the new technologies that will make us independent of oil? This enables us to say something additional about money. We have said that we are attempting to pump up our economy to give the impression of growth, so that others will be convinced, dive in and start creating new demand. Bluff is required to create the appearance of growth. Truth will follow confidence, we believe. But should we be pumping up the economy, trying to increase demand simply in order to save our concept of money. I have suggested that our understanding of money has an in-built bias for an expanding and prejudice against a steady-state economy. Money keeps getting our economy into trouble because it has a bias in favour of ‘more’ and against the same.
Money should channel our energy resources to where they are best employed to keep our economy viable. Money works well when it closely reflects the amount of energy any activity consumes. Energy is human labour and it is the mineral resources that have allowed us to achieve ever higher gearing of our labour. Money is doing its job badly if it does not reflect the amount of oil we are using.38 Since we have a declining oil supply we should have a currency that reflects that oil, which makes (oil is required for the supply of every other commodity). Money is virtual energy. Energy is the only true money. It is not money, but energy, that drives the economy. Let us put this more starkly still. Money is imitation of oil. Oil consumption and industrial production are in lockstep. But either we attempt to save our account of money by continuing with our policy of economic acceleration which involves consuming energy resources without restraint. Or we could decide to change our understanding of money and alter our account of growth so that we understood growth as not merely material but also personal. This might help us to re-discover some restraint in the consumption of resources: we could regard our fossil fuels reserves as fixed assets. If we refuse to alter our conception of money, we will continue to burn our fuel reserves until they are gone. Oil is presently the sole means by which there is any economy at all. We have to give up on our present conception of money, that is, default on the promises implicit in the present nominal value of our money, in order to preserve our energy resources. If we do not give up on our conception of money we will save our nominal financial positions by destroying the actual economy. Perhaps we should find a more sustainable conception of money. perhaps we should adopt a conception in which everything is understood to remain the same, until it changes. Sameness and thus Continuity should be the default setting, not change and growth. Instead of increasing the money supply we should reduce it. We should not be adding to the number of pounds in circulation, so making each pound already in circulation worth less, but rather make each pound in circulation worth more. If, for example we decided that each penny presently in circulation (or down the back of the sofa) was a pound (so that each existing pound coin was re-denominated as a hundred pounds, and each ten pound note was a thousand pounds) we would have put a great deal of our money stock into the hands of those best placed to spend it with greatest multiplier effect, the poorest. There would overnight be a fall in the need to borrow. The amount of credit-debt in circulation would fall, and so there would be far less money in total circulation, and so far less need to push relentlessly for growth on our present definition. Interest on debt is driving our manic economic activity which is driving our manic oil consumption, which threatens destruction of the future economy. Energy is the real currency. We have to take this vast cloud of debt-credit money out of the atmosphere. We have to default on our conception on money. Usury and Reform What can be done? We need to distinguish between the financial economy and the productive economy, and so between the financial and the real economy. If we can tell them apart, conceptually at least, we may be able to cram the financial economy back into more sustainable dimensions. There are many proposals that could help reform aspects of the financial system. We could replace the current debt based money system with a money system in which currency is actually issued by government, and banks are limited to the role of financial intermediaries between savers and borrowers.39 We cannot have high reward for low risk. The investor has to venture something, that is, to be ready to
Frederick Soddy Wealth, Virtual Wealth and Debt James Robertson
lose something if he wants to see a high interest rate. We can reduce the function of banks to clearing, a service for which we will pay them so that they will not make money from charging interest. We could create a range of parallel currencies in which city-wide and regional currencies operate alongside the national currency, and we each get paid in a mixture of currencies.40 Other international currencies may emerge alongside the dollar that will reduce the US trade deficit and allow the US to recover some of its own productivity and industry. Perhaps there might be more than form of currency in any one territory. In addition to the one legal tender, there could also be complementary local currencies and local trading schemes and credit unions. We can individually and corporately make less reliance of debt. If we cannot afford it, we can decide not to buy it. In order to redeem money as an effective means of communicating relationship and allocation resources, we have to do much more without charge for those nearest to us, and operate a pricing differentials that restore the advantage to our local communities. In order that the changes in the elements of the human economy are fairly represented, money must be able to register not only growth but its opposite. If money only has a forward gear, it cannot be an adequate metric of the human economy and will only prevent us from noticing that the human economy and the economy of the earth are decaying, not growing. Money must be able to reflect negative growth. We can opt for negative interest rates, so that we will hold 99p for every pound we put on deposit at the bank over the year. Thus our bank will be able to charge us for the service of holding our money. The good of work The modern assumption of a steadily increasing material economy is a function of willingness to allow the market to replace the provision of our own particular relationships. The corporations that create a single global economy do not encourage us to reach out first to those who are nearest to us in our own town, region, country. The global economy rubs away at each particular locality, as at every other particularity. We cannot simply exhaust the potential of each particular place, directing each culture to a faster and more complete integration and dissolution within the global economy. We could bring back some of economic functions, industry and agriculture, that we have pushed overseas. We could bring some of our inter-personal functions back into the domestic household and commit fewer household functions to the market. If globalisation means the eradication of the particularity of each place, we are simply flattening the world. Yet when each place is without particular feature or significance, why should people in any other place want what it produces? We divorce the material economy from the social-and-cultural economy, separating our day-to-day ‘economic’ effort from the long-term ‘cultural’ achievement of social capital. Work is good when it does not strip us of our skills, the company of our peers and with it our dignity. Work is good when it creates social capital and allows the worker himself to keep some proprietorial control over it. 41 Wages can never be an adequate payment; stock options must be part of our remuneration, and perhaps some part of our pension provision should be invested in the stock of the company we have worked for. 42
Bernard Litauer James Bernard Murphy The Economy of Labor pp.2-3 Ever since Aristotle we have had theories of justice in the distribution of goods (distributive justice) and theories of justice in the exchange of goods (commutative justice), but very little in the way of a theory of justice in the production of goods
John Médaille The Vocation of Business on widening forms of ownership.
Collective delusion and recovery The last forty years have seen the steady relaxation of the money supply. Money has become has become cheaper, so that it has become possible for us to buy more. We were able to buy far more than we earned. But we have done so only at a cost that we have not admitted. We financed this spree by cashing in quantities of social capital. In our lifetimes we have witnessed. We could call this a great unfolding of usury. We talked one another into borrowing more, and of lowering the conditions under which all these financial arrangements could remain plausible. We have been foisting a delusion on one another, that we could consume more than we were producing. For a long time we have been taken in, and been content to be taken in, and indeed demand that such bubble-conditions are sustained. Talk of ‘recovery’ assumes that we can go back to the conditions of lax credit by which we encourage one another to resume borrowing, regardless of whether this is in their interests, all assume that next year’s economy will be bigger than this year’s. Economic recovery requires that we tempt others to take on still higher levels of debt, even though we can be fairly sure that this will ruin them. Perhaps we need a drastically reduced banking system. But the notion that things must be financed, by credit, runs deep. We have assumed that no one can do anything simply from their own resources, and thus from what they themselves have saved. Perhaps there is no return to normality, but only a coming to terms with a new normality. Perhaps we ought not to expect the banks or even our governments to do anything of the sort. They should not attempt to create a recovery. We have to save the real economy from the clutches of the financial economy, and prevent attempts to revive the financial economy from throttling the real economy altogether. We have assumed that we can enjoy a steadily increasing economy and allow the market to replace the provision of our own particular relationships. We have to point to the underlying human economy in which one generation more willingly concedes it place in the ongoing history of the nation and more willing passes on another generation what it has received. It is not our present standard of living, but a deeper and more permanent way inter-generational way of life, that has to be upheld. But what if it is not so easy to distinguish between financial and real economies? What if the human economy is at bottom just a speculative enterprise?
7. Humanity as speculation
At the beginning of this chapter we said that the economy is fundamentally about the transfer of life, and all the means of life, from one generation to another. It is therefore about an exchange between generations. On this basis economic agency is not solely about what individual adults want, but about how to produce adult economic agents in the first place, and to maintain a working majority of active economic agents over the number who are dependent on them. If our economic agents are inactive, they are no longer agents, and then it is precisely the agency of the agent that is at stake. Each of us is active economically in a shortening period in the middle decades of life. Macro-economic policy recognises that the periods of childhood and old age are growing in relation to the period of economic activity. But modern economics is unable to integrate this into its fundamental conceptuality, in which each person is only ever an agent, an autonomous, active individual unit. For modern economics, all daily life appears about a progress towards a selffulfilment which is individual, and which has nothing to do with parents or children or past or future generations. The modern economy is about us, as
individuals, here and now. And yet we cannot talk about the economy solely in term of the fulfilment of the individual adult without coming up against contradictions. It is time for us to mention some of these. In the real economy we go to work in order to make money. The money we make we get to keep and to spend as we please. We are only frustrated that actually making money, not only earning it but hanging on to it, is such a slow business. But there comes a point perhaps in which we leave this ‘real’ economy in which we are the employee of one particular firm in order to enter what we could call the ‘hyper-economy’. After ten years of work perhaps we settle down with someone and have children. The moment our own first child arrives we realise to our horror that we have entered a much more primitive economy. We are trudging along on foot, pushing a buggy. The project of children had turned from the notional hobby of evenings and weekends into the bad dream from which we cannot wake. You have found the one event in twenty-first century life which is not reversible. Your friends in the real economy meanwhile speed on out of sight, moving briskly up through promotions from one salary level to another, occasionally coming back to commiserate with us, and take the warning not to do as we did. So with what relief do we find that after only three or four years we can put the children into child care, and in Britain and Europe that is even into free, state care, so we can get back into the job market, clamber back onto our career and resume life in the twenty-first century. There are then two economies, the unpaid economy of child-birth and child-care, and the ‘real’ economy of paid employment. There are as it were, two economies, the agonisingly slow one with children factored in, the other, faster, child-free economy. But above the ‘real’ economy in which we work and trade goods and services, there is another economy, of finance. Money is on the way to becoming a second economy that exists far above the first, a kind of stratosphere in which there are strong winds. We can feel the strength of those winds even down in the ordinary economy. They entice to send our money up there, where the fast flows and big rewards are. This hyper-economy draws money out of the lower levels where the real economy is, in which people work to live and to save for their retirement. The rewards of this stratospheric economy of pure money tempts us to decide to give up work. Earning a salary seems too pedestrian a way to save for our retirement. The temptation is to get out of the work-and- relationships economy. They tempt us to cash in our work and the relationships it represents and to put the cash we raise into the high speed economy of financial flows. We cannot wait to retire, in our fifties, to receive the lump sum which we can place up there in the hyper-economy. This vast explosion of economic growth represents an increase in our itemisation. Though we talk about ‘the economy’, as though there were only one. Perhaps it would be easier if we identified difference economies: let us say that there are three parallel economies. First is the economy is the one in which we produce children and all our income, and our time, are taken up with looking after the family. This is the household; here we progress at walking speed; this is the economy which no twenty-first century person can endure. A second is the economy in which we go work, put in our forty years at the office, get promoted and are able to save so that one day we can retire in comfort. Perhaps we should call this the ‘real’ economy or the ‘twentieth-century economy’ . The third is the hyper-economy of pure money. This hyper economy is the based on the belief that the ‘real’ economy of employees laboriously earning their pensions will
continue to grow, but that it is the duty of other more pedestrian types to inhabit that economy and put in that work. In brief interludes out of work, they may procreate and from then on gratefully hand their offspring over to the state first thing each morning. And it is the duty of the even less lucky classes and populations them to produce the children who will become the workers for that economy. For they must do so, in order that, far above the hyper-economy can blow and the hyper-wealthy fly. For the hyper-wealthy can no more be expected to work and drive to work, than they can to walk, bear children and bring them up themselves, any more than they can be expected to work in the fields or factories. The vast flows of the hyper-economy of money is a function of our failure to produce a generation to succeed us, and this is the result of a loss of individual economic self-sufficiency or contentedness and a diminished cultural confidence. We communicated to our children that we were their merely part-time parents; and that through school and the TV, their fundamental loyalty was with the state and the market. We all demeaned our own household, so now it is not there for us. This is the result of letting the formal economy squeeze the family household, and of our determination to get out of the family economy and into formal employment. The vast credit-and-debt flows of the hyper-economy are the function of our determination to get out of the prosaic business of earning a pension by working and saving, and get into the leverage business in which we prise an ever-large gap between credit and debt. Then we can scoop the credit towards ourselves and push the debt off into the distance. It is about calling the credit backwards towards us and pushing the debt forward into the indeterminate future. It is future-denial. Members of the Baby Boomer generation have been speculating with our finances and searching for higher interest rates, because we know that there are more of us, the boomer generation, than there are of them who will succeed us. If you are, like me, somewhere between forty and sixty years old, there are more of us than there are of those now between twenty and forty. So we middle-aged ‘boomers’ are suddenly realising that, in order to be sure of being able to purchase the care we will need when we are old, we will have to out-bid all our boomer contemporaries. We need more money than they. In the hope of getting ahead of the crowd we have been speculating with our money. Each has hoped that we have got into the fast-flow, big-reward stratosphere of the financial hyper-economy, earlier enough and that enough idiots pour into these markets after us to drive stock prices up so that we can take our profits, get out again and be laughing. But when this behaviour becomes so widespread that whole global markets are heaving so that all markets become fragile and unsafe, where are we going to put the profits that we have gained through our earlier speculations? Now we have unsettled the global markets that even the US dollar is in difficulties, whose bonds are we going to buy? Some of the boomers have made enough money to be confident that they can sit out a long retirement and pay for their own old-age medical expenses and care; but most do not. Those of us who do not have sufficient financial resources are in trouble. Who will we turn to? We left the family years ago, so it is not going to be there for us. Can we re-create it? This hyper-economy of money exists because we do not believe that our own children are going to wipe our chins for us when we are old. We do not believe that they will be there for us because we have been there for them. The bonds between us have not grown thick enough to hold them and us together, two generations held together person to person. We do not believe that they will there because we have not had enough children to be available to provide care for all of us, and perhaps because we personally have not had any children at all. We are importing the children of other societies, but we do not believe that those
we import now will still be prepared to do such menial work for us at that future moment when we will need it. Age and Demography Populations are falling. If children are money in the bank, those societies which are producing fewer are becoming poorer. Their poverty will become apparent only when the present larger ‘boomer’ generation retires, becomes elderly and then dies off. Each generation will be smaller than the last, have a bigger burden of the unproductive elderly, and so poorer and perhaps also less motivated. Each generation will have to carry a larger burden. But will those arrive from abroad have the incentive to support and care for the previous generation. We have be inflating the money supply for decades. We have intent on making everything more explicit. The principle product of the economy has become accounting itself, which is what money embodies. What has motivated us to do this? We are intent on making explicit what we are owed, because we are not sure that there will be people around us who share enough with us for our informal economy and informal accounting to be sufficient. If I fear that my kids and their friends won't know who I am, and won't care of me and offer me the services that comes from their honouring of me and my generation. Our determination to make out that we are richer than we are makes for economic delusion, a societal pathology. I have suggested that this has to do first with our wish to cut ourselves from the particular sets of relationships of our inherited social context. When we are young we define ourselves as units without intrinsic relationship, rather than as persons. When we are no longer young we fear that it is so, and thus fear that we will not be looked after by those who know and love us. There is no household economy to receive us and confirm and console us. Money represents our current forecast of our own most personal future prospects. Our conviction that we have to earn, or otherwise find, more money represents our failure to have children, and to bear such children that have a keen enough sense of obligation to us that they will be prepared to care for us in our old ager as we cared for them in their childhood, and so to their readiness to sustain the family as a functioning economic unity from one generation to another, so that no family member becomes that isolated individual who has to be picked up by the state when he can no longer pay for himself. We fear that we will not be allowed to grow old within the family and household economy. It was us who effectively disbanded the family when we went back to work after having our kids and this decision became final when the last of them left home. We ensured for ourselves that the family would not be there and thus that there would be household, no home. Now there is no family that is an inter-generational economic entity, rather than as a merely sentimental entity, to receive us again. Having put even our own work to out-workers in China, we ourselves will be put out. We will be put out to that care that can only be made explicit and paid for in formal terms. But this process runs both ways. It is because we make this explicit accounting that we are put out. And because we have made this explicit accounting we retire, separate ourselves from our work and colleagues. We fail to see this as a social death, the beginning of death. It starts the process of our own marginalisation that ends when no one knows or cares whether we are still alive and the only way of telling is by look at the bill from the care home . By accepting the premature form of death that is retirement, in which our labour, skills, and relationships and dignity are taken away from us, we will have a lengthening life-span. Modern medicine will prolong our old age. This extended
dying will make us much poorer and making the state that pays for this prolonged dying , much poorer, putting a prohibitive burden on the dwindling population of the economically active, who will see their own chances of receiving such care vanish to nothing. If we decided not to have anyone to follow us and honour us and be present at our deaths, some non-Western societies might say that we have already started the dying process.43 Work is good. If we work for as long as we can, it brings the slow social death which is retirement and biological death back into connection. We can die surrounded by, perhaps even able to say goodbye to, those who know who we are. You can die in the company of those who have lived and worked with you, rather than those abandoned to carers in hospital or care home who do not know you, in your last years and months, expensively staving off the inevitable. We have a paradox. The concept of growth is essential to the modern understanding of the economy, but it is not related to the two factors basic to any economy and any society – the biological factor of the procreation of new bodies, and the cultural factor of the formation of new persons. If neither bodies nor persons, and thus future workers and consumers, are part of the modern account of growth, what is it that we want to grow? We grow money, but as we have seen, this money may not be linked to growth of productivity, and may even be preventing the growth of productivity or the culture from which productivity arises. What would make us all more rich and secure? It seems that only a home-grown population bulge and a new attitude which would welcome it. Nothing would make you and me as economically secure as the birth of a large number of children who in twenty-years time will be in work, paying the tax and pension contributions which will provide a pension, health care and then old-age provision that we will enjoy. To ensure that this population bulge was economically productive for the long-term it would help if these children were produced by those whose mutual love we honour and hold secure by the public covenant of marriage. Bodies can beget bodies, but only persons have the inter-generational reason to do so. Babies are wonderful, but babies who will be formed by the love made public and enduring by a marriage have a good chance of growing into wonderful persons. Our economy needs an influx of young people. We could import them from other nations, but such a policy also depends on their readiness for the pedestrian economy. We need those who are ready to work and pay taxes to support the growing indigenous dependent population. But then there is the question of whether it is right to deplete other economies of those young and dynamic people who are their chief resource. The growth of the economy has simply been the growth of the finance services ‘industries’. But their growth has not been a growth of productivity in the real economy, but just a competition to account with ever more sophistication, in order to stay ahead of others. It is the function of many baby boomers individually trying to ensure that they should be looked after in their old age before their peers. It is their failure to raise a household and family that would care for them, life-long, that has created their fear and their fear that manifested in the long finance services boom. Nonetheless, in view of the dropping total population, the savings of each of them will have to work harder to out-compete the buying power of the savings of others. Thus financial services capitalism is a simply a competition to itemise with ever sophistication. We divide the existing entity so that we can identify two where there was only one and and so declare the creation of ‘more’. It is a proliferation of itemisation. So the ‘growth’ of the
champions is just the ‘dividing’ of body on one side, person on the others. It takes the embodied person apart to make body (inert) and life (volatile). The economy only grows by this division. Ultimately what is itemised and individuated is ourselves. Steady-state economy? In chapters four, I suggested that a particular generation, which I called the champions of modernity allowed us to definition which we have settled on for ourselves. they are the moderns, and since we have not demurred from their definition, we are their followers, we are moderns. This was broadly the generations, which included those who founded the Bank of England, the founders of American republic, and the speculative finance that funded the European empires. The myth of our modern ancestors is that the world will grow and our economy will always be able to expand. So far from being based in the givenness of nature, the modern economy is based in a powerful myth of the ever-expanding world, in which the horizon recedes before us as we advance so that there is always more territory to conquer. Because the world economy has grown the assumption is that it always will. The assumption is of continuity. Modernity expects things to continue the same – this is the fundamental neoclassical economic concept of equilibrium. But things do not remain the same, there is the unforeseen.44 The myth is that there can be unlimited growth of material resources. The myth is that things can grow and proliferate without limit, and that is the myth. There can indeed be some growth without limit, for persons can grow without limit, and human ingenuity can grow without limit. We just have to tell these two forms of growth apart. We have brought about a long economic crisis because we have not been honest about growth. Growth must be about moral growth, that is willingness to work, and so to produce and buy from our own regional and national community a good proportion of our material resources. Such material growth has in fact simply been about estranging ourselves from the processes that sustain our own bodies, involvement in which is a major part of our contribution as persons. I have suggested that the idea of growth must not be separated from the growth, or at least maintenance, of culture, and to the formation of persons in a culture. Through such formation we can learn selfrestraint and aim for a degree of self-mastery. Then we would not be in such a hurry to consume will be able to regard resources as savings and so avoid devastating the environment for the generations to come. The economy of modernity consists in making everything immediately explicit, so in realising wealth as present wealth, and separating the economy from the cultural economy, capital from social capital, body from person, and separating the immediate from the long-term that is the unity of past and future. But it is culture that supports, or fails to support, an economy. Economics can only ever be a shorthand that refers to a certain culture, and prosperity can only be sustained across generations, when that culture is passed on. Perhaps we will enter a more subdued period of low-growth, in which we will re-discover an economy for which growth not determined by growth.45 The materiality of persons, or materiality without persons
Hyman Minsky Stablizing an Unstable Economy (McGraw-Hill, 1986), Nassim Taleb Fooled by Ramdomness; The Hidden Role of Chance in Life and the Markets (New York: Random House 2001). 45 Patrick Deneen
The modern and early modern champions of autonomy divorced growth from human formation. Growth that relates to the maturity of embodied persons (not private individuals, but public citizens) is possible. ‘Growth’ that does not relate to persons, and that therefore merely refers to bodies, to the material things, and to the great torrent of material goods. If growth means that we never have to exercise self-control and so never have to become persons in this strong sense, then growth refers to the torrent of stuff and then ‘growth’ is utterly unsustainable. This torrent of material goods, each of which distracts us for a moment makes it unnecessary for us to develop the character of mature, self-governing persons. We have to ask whether the apparent economic prosperity of recent years has been premised on the wasteful and destructive consumption of existing social capital, without its replacement. Have we experienced in which our standing as persons is less than it was, so that we have achieved the very reverse of growth. We only need to recognise when we are well-off. ‘The misfortunes of by far the greater part of them have arisen from their not knowing when they were well, when it was proper for them to sit still and be contented.’ 46 In these earlier periods the economy was premised on growth of persons and societies towards maturity, rather than on merely material growth. If the economy was only about growth that was materially conceived, it would be about the degree to which persons separated themselves from their social and cultural contexts and distanced themselves from those around them. On this basis the economy would simply be about identifying and separating the bodily and material from the social and cultural, and stripping off all inter-personal relationship to turn the human being into a bare individual unit. This earlier and more rounded account of economics had a more measured approach to credit, interest and consumption, that made explicit the relationship of personal motivations and integrity to the health of the economy, and made explicit the relationship between the value of the money in circulation and the long-term future-orientation on economic agents. The Christian account of growth We grow towards one another Christians offer an account of the universal economy, in which every person may come into relationship with each other. We are oriented and headed towards this universality, the kingdom of God, but since we are not ready for this universal economy, it withholds itself. Jesus Christ is the true and universal form of man, and fellowship with him is the way in which each human being may fairly and without coercion, sustain a relationship with every other human being. Each encounter with every other person is the way by which we may prepared for that universality. That kingdom gives us time, and time as we presently experience it, is for no other purpose than that we become fitted for that universality. The universal economy already exists, in Christ. Where his communion is, that is means that the That global economy already has bodily form, albeit the form that is hidden, but which in faith may be recognised as the body of Christ. The future of the human economy is concealed within the catholicity and universality of the Church. The Christian faith is able to give us the name by which we can call that universal and catholic spirit, the Holy Spirit, to wrench us free us of all these particular forms of captivity, so that we can come unforced into the freedom of his communion. This
It was a question Smith asked. Adam Smith Theory of Moral Sentiments (ed, Knud Haakonssen, Cambridge: Cambridge University 2008 ) p. 237
God lets us come to him in freedom, so that in his company, we may come to all men. We must contrast this freedom with the brute givenness represented by the monism of any occult divinity that does not care to give us its name. So the Church insists that there are many forms of life and ways to give one another recognition, and thus that no form make all relationships explicit. There are therefore many currencies, and that each of us issues our own in love and, free from coercion has to affirm the worth of whatever payment, and means of payment, is offered to him. In the Christian account of the economy we can acquire those (political) skills, through an apprenticeship by which we can judge what is true and good, and can grow to maturity. Any Christian account will compare the private and individual account of modernity and the economics that results from it, with the public and political account of other earlier periods. The long Christian tradition contains the resources for an economics which was not based in material growth, but in another sort of growth, personal growth. The Christian tradition does not regard economics as an autonomous domain. It regards it as an apprenticeship in good judgment, and so in decision-making, that is in making good decisions, and so regarded economics as inseparable from our duty of enquiring what is good, and so into the purposes of human life. The Church insists that we are able to find and meet each other in the public square, approaching one another simply as fellow citizens. There may be a secular economy because there is an area of public concerns which may be tackled together without any centrally-imposed ideological unity. We may ask each other for what we need and we may provide for one another. We may use our judgment in describing our needs and meeting others’ needs. We come up with pragmatic – secular – responses to specific circumstances. Christians suggest that economics requires the discourse of virtues and character. We have to say that each event of encounter results in some (private, not easilydenominated) growth or deterioration in our character. We have to give ourselves the means by which the assess the movement through time towards the goal which is man. We can say that the man or the economy which swings between extremes of emotion will not reach that settled maturity.
1. The economy is about the transfer of life, and the resources required for life, from one generation to another. An economy depends on the presumption of continuity. 2. None of us is our own work. Others make us present. Our body and presence is their product of their work. We give the other man the resources he requires by which he can be present, to us or to anyone else, and so give him what will sustain his bodily presence. 3. We demand reassurance from one another; we want the other person to demonstrate their commitment to our relationship. We produce accounts of relationship and demand such accounts from one another. 4. We come together in order to exchange, examine and be reassured by these accounts. Our accounting and examination of one another takes explicit, expensive and long-term form. We come together in one place. We meet. 5. The past is all we have to show to one another that can secure our present relationship. All human transacting is about sketching and gesturing accounts of
our shared past. Money is the idiom in which we abbreviate such accounts of our shared past. 6. Our economic encounters have ceremonial forms which employ tokens. Goods and money serve as these tokens. We employ objects as tokens of our relationships and so identify one another by them. 7. Things are given to us and are immutable to us. But we also present states of affairs to one another as immutable. We insist on receiving from others that their acknowledgement that this state of affairs is immutable. We police the hardness of ‘things’. 8. Money is account-rendering. We give one another accounts of our relative positions. Money grows as our account-rendering becomes more sophisticated; we beguile one another with innovations in this account-rendering. 9. Money is a token of our shared past history. It is our society’s previous success at making contracts, made tangible. We put this token in the hand of our counterpart, and we demand an equivalent taken from him. Each coin is a miniature version of the accumulated hill of that nation’s history. 10. Money accompanies resources to the places that can make best use of them, and draws our attention to that movement. Money is also a form of signalling by which we encourage others into the stock that we presently hold. 11. The economy depends on maintaining levels of confidence and trust. Law and its enforcement enables the trust that enables markets to operate. 12. We dissipate accumulated social capital when we do not conceive it as capital. Social capital converted, deliberately or unwittingly, into money is dissipated. The growth of money represents the loss of confidence in cross-generational economic continuity. 13. Modern economics is premised on material growth. It accounts for material growth in deliberate ignorance of the economy of persons. Christians believe that we may grow as persons, or we may fail to grow as persons, or even grow backwards and so become of diminished stature. 14. Modern economics assumes that present economic product is solely the work of the present generation of economic agents. Yet time-lag in an economy may be longer than a single generation. Our present prosperity and economic openness may be the carry-over from previous generations, the product of momentum. 15. Relationship is reciprocal. Debt is relationship considered as non-reciprocal. 16. Money is inseparable from debt. It comes into existence as debt. It is not based the in the authority of the whole people, but of a undeclared clique. The state delegates the creation of money to a financial elite, which creates money by making entries in their ledgers, then lends it to individuals and government. Yet governments have the authority to issue money, and even to buy up debt and replace it with debt-free currency. 17. Money has the effect of separating its holders into lenders and borrowers, and so tends to widen existing disparity, creating a divide between the top and bottom, making the political participation of all its members difficult, and threatening the unity of a society.
18. Since debt bears interest, even when debt is cancelled or paid off, debt interest remains to be paid. Since interest has to be paid, we have to seek new transactions. The logic of compound interest means indebtedness drives a rise in transactions and continual expansion in total (explicit, monetised) economic activity. 19. The financial sector has to shrink. Governments can restrain it If governments do not bring it back into a more so that it represents a smaller proportion of our economies. If they do not succeed in this, their growth may cause the collapse of economies. 20. Money comes into existence as debt; debt drives growth; growth is sustainable as long as there are open frontiers and new sources of energy 20. The rise in transactions necessitates the rapid exhaustion of natural resources, chief of which are fossil fuels. The growth of debt-as-money drives the compulsion to realise our social capital now, rather than hold it for later. 21. Cheap energy has allowed us to create the massive complexity of the division of labour of the present economy. Without it many of our present forms of employment would vanish. 22. When becomes the sole medium of transaction, money is characterised by volatility which can become severe enough to squeeze individual economic agents, even entire populations, permanently out of the economy. Modern societies tend to polarise between top and bottom, and so cease to be united societies. 23. The growth of debt-as-money drives the compulsion to make all our wealth explicit now, and so we press ahead to extract all natural resources, rather than bank them for later. 24. As the energy component in every transaction rises, the demand for oil will rise, the global economy is likely to stall repeatedly. 25. If the global economy stalls people fall out of formal employment, are without purchasing power, so effective demand is destroyed. 26. Our concept of money is based in the belief in growth without limit in a world of finite resources. The expansion of debt assumes that we can expand credit at a faster rate than GDP, without limit. This leads to unsustainable growth and to crisis. 27. Cheap energy making transport costs negligible puts every part of the world in immediate reach and so under the discipline of every other. Local and national economies have been hollowed out, the global economy over-extended and rendered brittle. 28. Spreading risk re-locates, but does not reduce, risk. Conglomeration brings transfers the possibility of instability from a part to the whole of the market. When the whole market is threatened corporations persuade governments that the economic costs of large-scale failures are unaffordable. Governments take on corporation liabilities.
29. Governments cannot resist reducing their liabilities by running inflation. By running inflation the state negates virtue (abstinence) and so dissolves all sources of authority other than itself. 30. We cannot fix a crisis of money with more money (or more debt), because just what money is, is the problem. We have to fix it with something that is not money. We have to allow social capital to accumulate by recognising it as real capital. 31. The great cloud of debt is the embodiment of our fear of the dependency that comes with the aloneness of our old-age. 32. Continuity is the unstated basis of any society. As it has been up to now, so we want things to continue and no worse. Modern economics expects things to continue the same; yet things do not remain the same. There is the unforeseen. The unforeseen may be ‘more’ and ‘better’, but equally it may be ‘less’ and ‘worse’. 33. We assume that capital in the hyper-economy should command the work of formal employment in the ‘real’ economy, which should itself command the household economy of families from which new economic agents have appear. 34. The human pyramid scheme works as long as a new generation of sufficient size arrives which the existing generation can set to work.