What is money?

This is a piece we wrote for the SPGB’s summer school. The concluding sentence our regular readers will perhaps recognise, but it seems to us too good not to use at least twice.

The blind men and the elephant

What is money? As with pretty much everything else in the social sciences, you’ll get different answers depending on whom you ask. Societies are, after all, massively complex things, moved by human intention and will as much as by any other force, which makes them tricky things to analyse scientifically. Much heat, and occasionally some light, is generated by the conflict between the rival theories. Sometimes, of course, one theory will be contradicted by another, and one will be right and one wrong – which is which will be determined by an appeal to the facts. More often, in social science anyway, it will be a case of blind men feeling an elephant. If one blind man insists that the essence of elephants is trunkiness, and another tuskiness, and another thick-leggedness, then stepping back and taking a broader perspective, rather than choosing between them, will yield something closer to the truth.

Different theories of money are probably more like the blind men than they are like natural science. If they could be discriminated between on the basis of an appeal to the facts, then that would have happened long ago. It doesn’t matter then, for the purposes of my argument here, which theory of money one uses. I could have used any and come to the same result. But for novelty and variety, I have gone with one I hope Marxists will be less familiar with and hence find interesting.

A theory

Money, according to a theory with a long heritage but that came back into fashion in the wake of the financial crash of 2008, is a token issued by the state with the purpose of coercing work out of its population. How would that work? To answer that, let’s consider how money as we know it today might have originated. (The following story is not meant to be taken too literally as a historical account, but it probably captures something of the character of what really did happen.)

Once upon a time, there was a society without much in the way of money. Peasant communities produced directly for their own needs, and perhaps traded surpluses occasionally with nearby communities. For the purposes of trade, perhaps something like money had evolved as a convenience. But it played a peripheral role. Society was not organised around it. Then, one day, as happened now and then, the King decided to wage war with some other king, and an army was raised. This, as always, presented the state with a problem. To stand a chance of winning the war, the state had to keep the army on its feet, well fed and watered and sufficiently rested, and provided with all its other needs, bodily and military and spiritual, and this presented the state with an enormous economic calculation problem. Just how much food should be produced, and when, and distributed how? What spares and tools should be carried on the journey? How many horses, and how much feed will they require? Think about it even for a while and you’ll see that, even in a relatively simple feudal peasant society, the problems would not just be large – but intractable. The King had an idea. Perhaps he and his team of state advisers didn’t need to solve the problem at all. All they had to do was tax the peasants.

How would that work? All the state had to do to solve its economic problem was pay its soldiers in state-issued tokens, and impose a community-wide tax, to be paid only in state-issued tokens. The peasants, as we have seen, did not have much dealings with money at all, and none anyway in state-issued tokens. The state refuses to accept payment in kind or in any other kinds of money. What, then, is a peasant to do? What else but figure out ways of getting the soldiers’ tokens out of their hands and into their own? Figure out what it is soldiers need, then provide them with it in exchange for the tokens. The soldiers get their needs provisioned by the population. The peasants get their tax money and give it back to the state. The state has, merely by throwing bits of paper into circulation, coerced the population into stopping economic activity directly for its own needs and producing instead for the state. Magic. The magic, in fact, of the free market – of the Invisible Hand.

What follows?

If this theory captures something of the truth of money, and it surely does, then certain consequences follow. Social scientists working with this “modern monetary theory” have ideas about the implications for the working of modern economies. But for our purposes, it will be more interesting to consider what the consequences are for those socialists and communists who argue that modern society could do without money. Our sketch above helps throw some light on the arguments of those who say that it could and should, and those who say it’s impossible.

Those who say it’s impossible look at the role of the King and his state, and see just how much more intractable the problem of economic calculation has become in modern societies. To take just a few of an infinitely sprouting set of questions, how much energy need be produced to mine the gold for use in the army’s GPS equipment? And what would be the most efficient energy source for that mine? And might that gold not be better put to use in the aerospace industry? And so on ad infinitum. Money is the means by which society answers these questions and it can’t do without it.

Those who look forward to a moneyless society, on the other hand, just read the story backwards. What about those previous peasant communities that got along perfectly well producing directly for need and without much use for money? Had they not been perfectly happy and relatively prosperous before the King came along with his magic tokens? Could we not, now, do likewise? The claim that we could must take one of two options. Either the argument is that we could go back to some kind of simple peasant arrangement, directly producing for need. Or that we could keep the King’s army (ie, modern industrial economies) on the road, but without monetary incentive or state coercion, simply by doing all the work necessary for free, including the work of figuring out – by trial and error, and by means other than money, perhaps less efficient means – how to make economic decisions.

For those who argue that a moneyless modern society is impossible, both those options strike them as ludicrously unfeasible. Socialists and communists on the whole tend to agree with them that the first option is indeed unfeasible, so argue instead for the second. But if the second option strikes most people as unfeasible, then perhaps it’s not too hard to see why. The argument is that it is possible, within our lifetime, to create a society where a majority of its members fully understand and agree with the necessity of keeping the King’s army on the road, and selflessly agree to work, perhaps very hard, towards that end, without direct or selfish incentive. They would set the alarm at 6am in order to be at the factory gates (or office doors) on time for the orderly functioning of the economy, not because they are economically coerced into it, but out of their own free choice and will. That non-socialists find this improbable is hardly to be wondered at. But I wonder whether socialists have given it the full consideration it demands. If you agree, as I do, that such a societal arrangement is indeed possible, it has some direct political and ethical implications.

Breaking the spell

At the present time, we all work under the spell of magic pieces of paper, inscribed with runes and icons, and devote most of our energies every day to looking after Number One – an activity that comes naturally to us and, by the magic of the Invisible Hand previously described, keeps the King’s army on the road too as a bonus. How is it possible to break this spell? Socialists and communists have tended to answer that question in mystical and religious terms. “Material forces” are working in our direction, it is claimed. Technology will save us. It will all come right after the Rapture, the Revolution, say the Millenarians. Those of a more pragmatic, earth-bound frame of mind will see through all this. External material considerations are of course important up to a point, but for the vast majority of us living in the rich countries, at least, that point was reached long ago. The idea that technology will save us is a feeble capitalist myth that socialists should know better than to fall for. As for the Rapture, the pragmatic know full well that tomorrow never comes. Think of the wise barman who had “Free drinks tomorrow!” written above the bar.

No, if you are labouring under a spell of delusion, there is only one way to dispel it, and that is through your own hard work. If you know deep within yourself that a society of goodwill and peace is possible, where people work freely and with good cheer for the common good for no other reason than that is necessary for the prosperity and health of us all, then there is only one thing to do and that is to live your life in accordance with that truth. That does not of course mean refusing your pay cheque. Socialists have to be practical. But they also have to be good propagandists for the cause. Anyone who has been a socialist for even a year or two will surely realise by now that propaganda by the word is, roughly, useless. Talk is cheap and everyone knows it. But propaganda by deed has a power beyond the magic of money. The socialist political project goes much deeper than ideology and party-building. It involves a deep reformation of individual character, a commitment to doing good works in a spirit of comradeship and charity, to care for one’s neighbour as much as oneself. Out of such commitment, it’s feasible that the necessary political and economic changes will come. What is not feasible is that it will happen the other way about.

Socialists have long said that socialism is not just a nice idea, but is a practical possibility. But too many of those who say that only entertain “practical possibility” as itself a nice idea. Socialism is indeed a practical project – but it begins with us, today, in the work we do and the attitude with which we do it. As Maya Angelou said, nothing will work unless you do.

Be anarchist, act communist, embrace markets, smile at hierarchy

For years we have been tormented by ideas and contradictions. Capitalism or socialism? Democracy or leadership? Class struggle or social peace? For or against? What is our “position” on the coming war? Or election? Determinists or not? Materialists or not? Is our being a matter of biology or society? Or perhaps philosophy? And so on and so on endlessly. We gave ourselves much pleasure –and much pain too – thinking endlessly and compulsively about the answers. So much so that, in the end, the thinking itself became as much of a problem as the ostensible one. The problem was not in fact our problem; our problem was the desire for a solution.

What we were doing was not so much use thinking as a tool for dealing with life as trying to fashion an identity out of thought. In other words, we were making a religion. And as we all know, religion is the source of much solace, a good basis for companionship and solidarity – but also the source of much violence and strife.

Let’s take just one of those problems and examine it. The big one for us, and to some extent perhaps it still is, is the question of socialism. Your bloggers met having both recently converted to one of the west’s most important but declining secular churches, Marxist socialism. We had pondered the question, capitalism or socialism? And come up with an answer: socialism.

But is an answer in fact called for? For Marxists, capitalism is a totalising system that comes to embrace the whole world, and calls for a totalitarian response. Capitalism is a total system; it must be replaced by a total system. But outside of the theory, in the real world, this is of course never true. In our own society, as in all previous and present-day societies, you get a bit of both. Future society is hugely unlikely to be any different on this score. There are three basic ways of organising human affairs*.

The first is communism. The defining principle here is, “from each according to ability, to each according to needs”. In other words, if someone wants or needs something, then within the confines of reasonableness, they take it. If you can help them achieve something, then assuming you’re on good terms, why not? They’ll probably do the same for you one day. In other words, communism is how humans organise their affairs when they are hunter-gatherers going on a hunt, or members of a nuclear family, or friends looking out for each other, or workers working together within capitalist offices and factories. Contrary to the prejudice, it works well.

The second is exchange. The defining principle here is equality and fairness. It’s what happens when human individuals or groups come into contact with one another, and want to interact to their mutual benefit, but without then being obliged to enter into more intimate long-term relationships. It’s how humans organise their affairs when they are hunter-gatherers encountering another tribe with whom they want to trade, or when capitalist companies want to acquire raw materials, or when we go shopping. Contrary to the opposing prejudice, it can also work very well.

The third is hierarchy. The defining principle here is one of mutual duties and respect. It’s what happens when human beings are not equal in some way – they differ in wealth, in power, in knowledge, in wisdom – but who nevertheless form long-term relationships with each other and who therefore expect things from each other. It’s how hunter-gatherers pay respect to the wisdom of their elders, how we relate with our teachers, or interact with our bosses and rulers.

Now, there is a prayer, which we first came across in the writings of Kurt Vonnegut, but which is apparently a staple of Alcoholics Anonymous, and it goes like this:

“God, grant me the serenity to accept the things I cannot change,

The courage to change the things I can,

And the wisdom to know the difference.”

It struck us immediately as something worth remembering, perhaps something clever, perhaps just a piece of homely wisdom. What we didn’t quite realise or appreciate, but do now, is that, like much of what is dismissed as homely wisdom, it is in fact just wisdom, and that learning how to tell the difference between the three things and act on it is a lifetime’s work.

Of course, some questions demand an answer, and the answer is either right or wrong. Then it is a matter of science. But social life rarely submits to such simple analysis. Capitalism or socialism? The answer may well be both, if we have any choice in the matter at all, which we probably don’t. Certainly, making an ideology and an identity out of it will do nothing to further the cause one way or the other, and may well do more to hinder it. This applies quite as much to the Adam Smith Institute as it does to the Socialist Workers Party.

Much more important than such questions is the quality of our being, and this is where the anarchism of our title comes in. Of course, most anarchists play precisely the same game – they make an identity and an ideology out of anarchism. But anarchism should really go much deeper than that. The most important authority to free ourselves from is not the state or capitalism, but the ego. We must free ourselves first from the idols and fetishes we set up in our own minds to rule over us, topple the authoritarian in our head who demands an answer to every social question and problem, face down the child that shies away from whatever it is that’s going on in the world. Because when we are free from all that kind of thing, we’re also free to act – to listen carefully to the person talking to us, for example, then do something to relieve their suffering; to oppose injustice; to face down hierarchies that have outlived their usefulness; to replace capitalism with communism where appropriate; communism with capitalism (or markets at least), where appropriate. We will be free to be anarchist, act communist, embrace markets, and smile at hierarchy.

* This schema is indebted to Debt: The First 5,000 Years by David Graeber.