Saturday, September 1, 2012

Of Turbulence and See-Saws


It’s been settling down for me, turbulently, while ‘out there’ in the rest of the human world turbulence spreads like a cancer, warped and guided by the anomalies of the Olympics, politics as usual, media as usual, tragedy, terror, war, miracle, humdrum etc. As I repeatedly say, This Time It’s Different, and more than the usual grade of difference too. This is a personal impression I can unscientifically validate by looking for good news and bad news on alternate days to set up the see-saw of turbulence I experience internally, but I suspect a power struggle within the status quo is indeed raging, one which threatens (This Time It’s Different) to cut to the very core of the status quo, and rip it apart. The attempt to rescue the core elitist extractive dynamic (a.k.a. the state) via ‘reform’ risks breaking that project. Yet riskier still is blind adherence to the thinking which has generated this mess; the sociopathic pursuit of monetary profit and power for its own sake, an addiction to hollow control and self-aggrandisement I see as a cultural sickness clearly manifested in our politics, business and consumerist culture.

Events see-saw back and forth. The status quo farts out some new spin, some new fear mongering (sustaining an atmosphere of pervasive fear is so very important) to supress the surging emergence of the new paradigm, while within the strongholds of that very status quo, cracks appear. Articles in The Economist, The Financial Times, The Independent, The Guardian and a white paper from the IMF have identified the debt-based, high powered money/credit money system as responsible for our global financial woes, as calls for a guaranteed income find friends within the status quo in increasing numbers. This amounts to an identification of commercial banks as the primary ‘cause’ (let’s say outlet) of the financial crisis, and an acknowledgement that there is not enough ‘economic’ work for all, that technological unemployment is indeed one of our era’s key challenges. Radical is the new normal.

Recently, the CDU (Germany’s conservative/right wing political party) released a paper proclaiming a guaranteed income cheaper than the current social welfare system. The party’s Thüringen president, Dieter Althaus, is calling for 800€ per month per citizen. In Holland, a new party (Soeverein Onafhankelijke Pioniers Nederland, SOPN, “Sovereign Independent Pioneers of the Netherlands”) has formed to fight the upcoming elections on the 12th September, and they have guaranteed income as their central policy. In Germany, The Pirates have fully adopted the idea, while the left’s traditional opposition appears to be softening. Ralph Boes (who is about to go on hunger strike in Berlin after being sanctioned 60% of his welfare, starting September) had a conversation with one of the left’s more prominent and powerful politicians for whom he laid out the VAT flat tax proposal as a means of financing a guaranteed income. The politician had never heard of the idea, and was apparently very excited about it. The left worships labour, and thus has traditionally been opposed to guaranteed income, until now. Brazil already has a guaranteed income enshrined in its constitution, is only lacking the legal and financial apparatus to implement it (a pilot study has shown amazing results). Across the political spectrum the idea is increasingly seen as the only way of saving the system. Which is dangerous.

Deep reform of the money system must, in my view, accompany a guaranteed income, as well as a very broad and open debate on the shallowness of consumerism. Not only is economic growth ad nauseum deadly, even if it were possible (as we culturally envision it: gadgets for all forever in ever growing quantities), it would destroy community and commons everywhere. Our current money system collapses if the economy is not growing, which is a terrible design flaw. But one of the many things that is changing, is our cultural relationship with consumption (in the US for example (2010 data), over 750,000 people live off-grid, a huge number). I believe more and more of us recognise the counterproductive addiction inherent in distracting ourselves with Entertainment and Gadgetry from the hollowness of our seemingly pointless lives. While we cannot know what the new vision/story will look like, we are surely looking for it, fumbling to define it, to bring it into being. So the danger of the misplaced and short sighted desire to reignite growth is perhaps not grave, yet we should stay alert to it.

And growing local food is finding strong support in ventures like Incredible Edible (spreading across the world as I write), which I find very exciting. A town in the Rheinland area in Germany (Andernach) has called itself the Edible Town (Die essbare Stadt (YouTube, German)). Fruit, vegetables and herbs in great variety grow all over the town, and anyone can harvest whatever they like. The entire project is sustained locally, with a mixture of volunteer work, 1€ jobs and local governmental funding. What I find most warming about such stories, is that the anticipated vandalism and other cynical abuse of the gesture (essentially free food for all) has not materialised. This is, for me, a reminder that people respond positively to generosity, to well-planned and well-executed endeavours to replenish the commons and strengthen community. Despite decades of community erosion, it is as if something in us is ready to take this idea up and run with it.

There are so many other positive things happening ‘out there’, but, like I said, this is a see-saw. What is dying (calcified elitism and exploitation as a perpetual growth dynamic) does not want to die, and will lash out, defend itself, attack all perceived threats as brutally as is required. And there are ecological and other environmental disasters awaiting us too. All is far from rosy, as a look at the world’s trouble spots will tell you. As I argued a while ago, the state can wait, while not being able to wait, which I see as an explosive tension. Yet it is the positive which inspires us towards new work, and from what I can see, the urge to the new is only growing. The cynical voices sound shriller and shriller, their arguments less convincing, die-hards are softening. A few weeks ago, Franz Hörmann (who’s star is on the rise again) addressed a conference of some 160 bankers, laying out his vision for a moneyless future, in which banks would act as repositories of business wisdom, working in partnership with the community to do what is best for the whole community. Hörmann said their response was enthusiastic. (And yes, business can be conducted without money as we know it. Business is simply about organising projects and harnessing human abilities into constructive action. A root and branch re-understanding of profit would go a long way in this department!)

Many in ‘power’ know this system is broken, and millions of ‘ordinary’ others too. A survey conducted by Die Zeit (a German newspaper, text in German) found roughly 80% of Germans want a new economics, principally one which needs no growth. Approximately 66% of Germans no longer trust market mechanisms to solve economic and financial problems. This is a sea change. What is needed, therefore, are practical and sensible steps out of this quagmire of self-annihilation towards a very different social agreement, vision, mode. Whatever ‘starts’ this change, will need to be quickly accompanied by other ideas. If ‘revolution’ indeed begins with a guaranteed income, it is up to us to press for deeper reform/revolution. One of the things a guaranteed income does give us, is time. Today, that is a precious resource. Imagine what Occupy could accomplish if they did not have to worry about money and jobs! Imagine what movements like Incredible Edible could accomplish. Imagine what types of volunteer work could flourish. 

There is no silver bullet, but I believe a guaranteed income is a very good ‘starting’ point. Accompanied by a revolution in the money system and attendant deep changes in our habits of consumption, this would indeed be, at least potentially, a set of measures to put us, culturally, on a path leading to a resource-based economics.

28 comments:

Игры рынка said...

Every human/animal society and system has a "black sheep" mechanism. It is required to sustain "xyz" (insert whatever you want) coherence of the given entity. How will guaranteed income deal with this "problem"? A system which is not inherently self-stabilizing will sooner or later blow-up as we currently observe real time.

I also think that we just forgot to build and/or dismantled stabilizing features of our money system. There is nothing wrong about money. It is all about how WE pretend to use it while in reality THEY use it for us.

Игры рынка said...
This comment has been removed by the author.
Toby said...

Hi Sergei,

I'm not sure what you mean by a black sheep mechanism, so cannot answer your question.

And are you saying that money is perfect? Of course it isn't, just as a guaranteed income is not, as I have repeatedly said. Like all solutions, is solves some problems and introduces others. But that's a good thing; we need problems to be creative. Which may be what you mean by the black sheep mechanism. So I would say (if I'm reading you correctly) you don't have an objection to a guaranteed income, but rather to your incomplete understanding of it.

Do you have a definition of money you are happy with? If you know there is nothing wrong with money, then you must know it precisely. But if you are suggesting we need a democratically controlled money system, we might be in agreement. However, the devil is in the detail, and the detail starts with a good and solid understanding of what money is.

Игры рынка said...

Toby, any society/group of people/animals has a survival instinct. It tries to defend itself from the aggressive world. Under aggressive world we can be talking about other groups of people/animals or various natural events like general weather or natural disasters. No dispute (or?) that any efficient and effective defense mechanism requires certain level of coordination and subordination within the group of people/animal. We can clearly observe this in nature as well as in the evolution of the human race.

While effectiveness of (technocratic) defenses has increased a lot during this evolution not much can be said about efficiency it has not yet fully replaced the efficiency part. We assume that at some point of time in the future we will fully conquer the nature and therefore stop bothering about efficiency. I am fine with that. However no amount of technocratic progress will solve the problem of internal (within the group) communication, coordination and subordination. And this is where the group itself has to defend its homogeneity because its homogeneity is THE tool of defense against itself. That is why black sheep mechanism always existed. It works to expel those members of the group which create outliers of heterogeneity, if I can say so, and therefore threaten the survival of the group as such. It does not mean that black sheep is a bad thing. It is part of the progress and evolution. But this evolution is also a different story.

I hope I made myself more clear now.

Wrt money and guaranteed income I think your efforts are misguided. For one thing income is a flow of something (food etc) while money is clearly not. You can not replace one with another simply because there is no dimension where they overlap. Therefore your motivation for guaranteed has to come from some other source (and it does and I mostly agree) and yet you seem to blame money as such for problem it can not solve.

I am fine with definition of money a-la Graber, i.e. money is a debt which is a right by the holder to claim something from those who carry the obligation to do something. Throughout most of human history money has been an unquantifiable social relationship which over time and due to increasing travel/globalization evolved into its modern quantifiable form of capitalist economies. Where is the problem with it? I find it hard to blame trees for being not green enough after we start suffocating having cut half of amazon forest.

Democratically controlled money system? Please note that you are now talking about the system and not about money :) These are two very different things.

But I guess I have problems with democracy. It is just an ethically "legalized" mechanism of "black sheep"-ing. It is hardly scalable for requirements of todays world and creates enormous problems of efficiency and coordination which obviously lead to problems of effectiveness. I have raised this point before here and I still stick to it.

Our problem is not money or democracy or system. Our problem is in the size of the human race. Complexity of coordination grows exponentially with size and any individual human being is incapable to comprehend the reality of today's scale. This is the conflict from which we suffer and for which we need a solution.

Toby said...

OK, black sheep problem = dealing with people who don't comply. I don't see how this relates to guaranteed income at all. Just because some human black sheep who refuses to play by some rule or other will not starve when rejected, does not mean that social exclusion will not work, nor that it can have no bite. People can be forcefully expelled from groups with or without money, and always have been.

As to money not being a flow, it most certainly is. Money is only money when it is being used, when it is flowing from place to place. As to confusing money for the money system, no, I'm not doing that. On the one hand, you're right. There's nothing 'wrong' with debt obligations and networks of social relationships based on those obligations, but interest bearing money created as debt (collateralised via private property) in pursuit of profit, where profit itself is based on the price system and therefore on the unquestioned assumption that money is a good (enough) measure of value, on top of which it is a tradable commodity, on top of which the system forces perpetual economic growth by design, then the money system IS money and IS the problem. Money is used in particular ways as a consequence of our understanding of it, and what we understand of our need for it. These systemic issues are the issue, and cannot be separated from some a priori and eternally unchanging entity called "money", which somehow exists, in pure form, beyond day-to-day use of it. There is nothing to conflate here. Money IS the money system, and can thus be changed to suit changing circumstances.

Democracy in its direct form is being tested in various places and in various modes, often with great success. I strongly suspect direct democracy will play a very important role in coping with the coordination/complexity issues you rightly address. I don't seek one world government, some enormous Super State controlling society from the top down. THAT does not scale (that far, anyway). Localised (and far smaller) direct democracies seem far more likely to succeed, and permit transparency too (unlike the paranoid state), and can cooperate with each other with internet technologies. The famous local-global kind of thing.

I think that is where we're headed; away from the state and state-sustaining money/price systems, towards smaller, nimbler, less hierarchical and far more transparent systems of social self-organisation. Money will be changed by those changes. It cannot not be.

One last thing. Just because technology/guaranteed income can take care of everyone's material needs, does not in any way mean all people will be happy, functioning and conforming members of society. It just pushes challenges and creativity to different (less 'materialistic') areas. There will always be 'winners' and 'losers'.

Игры рынка said...

Toby, I might have been super unclear with my statements. Forgive me this.

I am generally not against this or that and also not in favor of this or that. I am trying to understand what the problem with our current system is and how we can build a better one. However better for me means not more equal or more dynamic or more homogeneous or more heterogeneous or more this or that and not even less consumeristic or less environmentally abusive or less this or that.

Better for me means self-sustaining, self-correcting and self-stabilizing. Better purely, so to speak, in engineering/mechanical sense.

Therefore I am not arguing as such against or in favor of guaranteed income. I rather do not see how it self-sustains, self-corrects and self-stabilizes our system whether democratic or not. You are clearly right in saying that it solves some problems and creates other problems. But I have hard time accepting that we need to create problems because creativity is good.

I would rather solve the problem to the best extent possible (if even for today) and start dealing with other problems. Why should we keep on creating new problems when we have plenty of already existing problems? Why do you want to bother with social architecture and engineering 24/7 when we have, say, a problem of cancer or environment which can kill us all?

On this ground I tend to say that guaranteed income is a non-solution. Moreover I see potential to, as you say, create even larger problems than we have today which can be even less tractable than the ones we have today. Why? Precisely because guaranteed income does NOT solve THE problem and is a patch to the current system. And it can be like the whole mainstream economics today that you rightly critique which tries to solve (very small "the") the problem which is most likely not even A problem.

Re democracy I have a suspicion that it is a dead end and have little praise for it and its attempts to solve THE problem. I think that democracy is inherently a very regressive system. For one thing believers in democracy have to believe in invisible hand. Where such belief got us is very visible today (nice punch isn't it :)). But it is obviously a completely separate topic.

Toby said...

This sort of difficulty to communicate over blog comments can get pretty frustrating, but at the same time it forces one to be clear about one's position. I like your very open position, it's the same as mine, not really for or against anything, but looking to see what makes most sense in today's circumstances. It's always nice to meet people who have that basic posture. :-)

As for a GI creating problems, that's a generic issue, not a specific one. I believe there is no final solution, and that therefore all solutions, without exception, create new problems (or challenges). It is not that we seek out problems because we need new ones so as to be creative, but rather that to seek perfection is to seek death. And, to repeat myself, there is NO silver bullet, nor is there One Problem at the heart of all social problems which, when solved, heaven on earth will arise. GI, as but one part of many ideas/solutions, will 'solve' all sorts of challenges, and, generically speaking, introduce new ones. It's going to be like that no matter what. That's the way life works, so to speak.

Democracy as I envisage it is not a binary, either/or solution either. I mean it more as an evolution from where we are. It will work better as educational processes are opened up, become privatised if you like, and as we, culturally, learn to take better care of ourselves at very local levels, and globally too. This is happening as we speak. Will it be a smooth process? Of course not. Neither was the establishment of the state, which was a very bumpy journey, and has remained bumpy. As if self-correcting nature were nothing but plain sailing! We are it as much as anything else is. Nature (we've have this conversation on dualism before) is inescapable, as Goethe pointed out a few centuries ago, as other cultures have asserted since the dawn of languages. Sustainability is thus merely the wise and ongoing adaptation to change, since change is nature, nature is change. We are thus not at war with nature as such, unless we choose (tricky word "choose", but it will have to suffice for now!) to characterise/perceive our situation that way (permaculture is very good at laying this out, and at presenting alternatives too). Competition and cooperation, for example, are not opposites, just as selfishness and altruism are not. They are complements of each other. At least, that's how I see it. And our perceptions and understandings of All That Is (nature) themselves change our relationships with All That Is, or more clearly, change All That Is, since our understandings and relationships are necessarily part of that ongoing change. There's no escape, no separation, except to the degree of illusion that we see things that way. And since everything is illusion anyway, this is perhaps not saying much, or saying a lot, depending on your point of view! ;-)

And isn't it funny how our discussions always end up circling this weird point? "The Ascent of Humanity" is very good on this, the fallacy of dualism, the 'error' (though creative) of Separation.

Игры рынка said...

Yes, it is on my reading list.

Unfortunately there are too many things to read given the time I have to spend on getting my income :) apart from other important things in life.

Игры рынка said...

Toby: Money IS the money system

After having some thought about it I respectfully but fully disagree. Money as such does not have any goal. Any system as such and by definition does have a goal. Interest rates do have a goal but this goal is not intrinsic to money. However even interest rates is just a part of the system. The big question is still what do we want our (money) system to achieve. Do we want it to reward monetary investments/savings or do we want to manage the functioning of the real economy however we define it? In our modern money system, thanks to the mainstream, the answer is clearly the former. But it is a problem with the system and not a problem with money.

As long as we admit that we are ok with 6-7-8-9 bn of people in this world I am afraid money will remain the best coordination mechanism possible. All we need to do is to work on goals.

Toby said...

There are some problems with your argument.

1. You define a system as a phenomenon whose defining quality is that it has a goal. While this MIGHT be one possible quality of some living systems, I do not accept it as a defining quality of all systems. Fritjof Capra defines a system thus:

an integrated whole whose essential properties arise from the relationships between its parts.

A television is a system, but it has no goal. A hydrogen atom is a system but it has no goal.

2. Because money does not have a goal, it is not a system. But does the money system have a goal? (And see my objection to 1.)

3. Your position does not explain how there can be money absent a money system, even assuming parts 1 and 2 are sound.

4. Your conclusion that money is not the problem because 7bn+ people need it to self-organise is a non sequitur, and unprovable to boot. Although, Charles Eisenstein agrees with you on this one.

Nothing makes sense in isolation. Everything is a system one way or another: “An elementary particle is not an independently existing unanalyzable entity. It is, in essence, a set of relationships that reach outward to other things.” (Henry Stapp) Money is not an eternal constant, present in Universe forever more, and somehow there at the Big Bang. Money is an emergent property of human society. It will change (disappear perhaps) as society changes, just as societal change gave rise to it. And, just as an atom is, so is money a system. I am aware of no exceptions to this. Nothing can make sense or even exist in total isolation.

Gunnar Heinsohn and Otto Steiger define money as a debt-based claim on private property. In their book "Eigentum, Zins und Geld" ("Property, Insterest and Money") they lay out in painstaking detail how this tightly related trio arise together in human history pretty much as an integrated system. For example, one of the reasons East Germany was in such a mess post 1989 was that there was no private property, only commonly owned buildings and businesses. East Germany money thus had no legal grip on anything, so turned out to be of no concrete or lasting use. So here, with this very scholarly definition of money (which is apparently the first sound definition in history), we have a phenomenon that is an emergent property of the cultural systems that support and sustain it; property and interest. E.g.: “As soon as a property-based economy is established, goods with money prices appear.” Property is essentially something which can be traded for money, money being a claim on property, with interest the payment for forgoing use of that property, where money is also seen as property. Quite the circle jerk. Removing this system (money) from all its supporting and enabling systems to then consider it in isolation and expect to see its 'true heart' is simply impossible.

In terms of needing debt-based claims on private property to self-organise, I would suggest that depends on our goals. Do we want consumerism in endless pursuit of ever growing economic activity and monetary profit for its own sake, or something else? I'm for Something Else, but believe we have to slow money down, steadily demote it while defining and establishing this Something Else. This will take time and be a very bumpy ride, but it is happening anyway. I remain convinced that guaranteed income has an important role to play.

Игры рынка said...

Toby, I did not mean system in a broad sense but rather in the limited sense of our particular topic. In this sense a system is a set of social institutions which establish specific rules which govern these institutions. These clearly have a goal. Levying interest rate has its goal which is part of the system but not intrinsic to money. Many religions, including Christianity in the strict sense, forbid interest rates. So yes, money system does have a goal and this system at the very least establishes the rules of social behavior accepted/approved by the established institutions for the purposes of that goal. And no, money does not have such goal and can be abstracted, or in other words, used in the same form in any other money system with different social goal and set of institutions.

For one thing "money" is used by communism and capitalism alike - two completely different monetary systems and completely different institutions and rules. And so you had a clash of two systems between West and East Germany at the centre of which was the same thing - DM.

And I do not think of money in terms of claims on property. Communism and socialism have money but no private property.

Toby said...

But you are still failing to address how money can be implemented outside of a money system, how it can be used or even exist. I see the distinction you are drawing as entirely cosmetic. There can be no money without a system of design, creation, destruction and distribution of that money.

Further, the degree to which money really is a functioning money absent private proprty (broadly, this is simply goods and services for sale), is evident in the mess of the now defunct Eastern empire. One of the reasons for the failure of communism may well be the absence of private property at certain levels within a money system designed around private property concepts. When it comes to Islamic money systems (which don't use interest for money creation), there is nevertheless interest present in the form of rent. However, this is an area I have yet to study closely. It is on my to do list.

Игры рынка said...

Looks like we are back at the definition of money :)

Your argument that one can not have money outside of money system looks wrong to me. Surely once you get to money you need to build/have a system. But you can build system A and system B based on the same money and they can have different, even opposite properties. Even within capitalism (i.e. mixed property) you can have monetary system with clearly different sets of rules - neoliberalism, keynesianism, austrian etc. They all use the same tool - money - but establish different sets of rules of behavior. Money is like nuclear power. You can choose between bombs or nuclear power plants. So money is a part of our social relationships but you can choose how you mold them to reach your specific goals.

GI will also use and rely on the same boring money. But it represents a fundamental shift in the goals which will require a pretty much complete redesign of the whole monetary system.

Toby said...

None of the economic traditions you list, nor any others (in the west anyway, Fei Lun in ancient China looks very interesting) I know of, change the money system itself.

On systems. Just as a human is nothing outside a system capable of keeping him or her alive, is necessarily a product of environment and biology in a constant exchange of reactions, so money cannot exist outside some system (or systems) needed to give it 'life' and meaning. This is a basic truth of Universe and systems, as far as I can tell: nothing makes sense in isolation.

If we say money is only a debt-based claim on property, and forget defintions like medium of exchange, store of value and measure of value (which are fallacious anyway), then we could assert that anything which is not a debt-based claim on property is not money. For this to hold, everyone would have to accept it, and that is not going to happen any time soon. But nevertheless, that definition embeds money in a system of property and debt and interest.

If we accept orthodox economics and the above mentioned trio of qualities most people know, money must still be embedded in a system which has the 'need' to measure value via prices (the market/price system) and to store value in that weird, abstract way money seems to do. The definition of money we agree on must imply and give rise to the system in which it functions. One cannot be separated from the other.

As to guaranteed income needing money, that is of course true (unless we follow Franz Hoermann's system and use vouchers, as briefly discussed in an earlier post). But imo we are, culturally speaking, a very long way away from operating without money, whatever that really means. After all, defining money is by no means an easy task, so knowing whether or not we can operate without it must remain a mystery. In the meantime, modern circumstances -- environment, technological unemployment -- require deep adjustments, one of which is guaranteed income. In my opinion.

Игры рынка said...

"None of the economic traditions you list, nor any others ... change the money system itself"

You are unfair. Of course they do.

For instance austrians are strong believers in gold and just last week or so republicans in the USA made a statement regarding return to the gold standard. This is a significant change to the money system: not just to immediate redefinition of "proper" property but also perspective changes to re-distribution of property.

In the similar vein neoliberalism and Washington consensus generally advocates for fixed exchange rates under which local central banks have to subordinate domestic economic policy to external developments. This money system is very different from the gold standard despite some visible similarities.

I do not like your persistent references to money as a claim on property. It is not. Even an explicit debt contract does not have to have an embedded claim. And money is an abstract debt contract where such a connection, if exists, is orders of magnitude weaker. Moreover your claim assumes that there is no bankruptcy laws or any debt has full recourse. Both are counterfactuals and you can not use them as arguments.

I also do not view the mentioned trio as defining characteristics of money. This trio comes from textbooks and textbooks are dead wrong on the nature on money.

Medium of exchange is bank deposits. Store of value is anything we have/want. And measure of value can be everything we want. There is only one constraint here and it regards the payment of taxes which has to be carried out in a given type of money based on given valuation rules etc. That is it. Outside of this domain everybody is free to do whatever they want ...

... but only within the defined system of rules/institutions. For instance, if you do not have a bank account in a modern society, you are noone. So you need to have a bank account. Then as all voters in democracy have bank accounts we need to start supervising banks and guaranteeing those accounts. And so on. Or we have to have a private pension system which forces people to save. And thus indirectly forces government to issue bonds. And so on.

We can build a different money system which will be run on completely different principles achieving completely different goals. It is up to us how we run ourselves.

To steer = “to follow or move in a set course”. So you/we have a strategic goal but we still need an operational tool that we can use for day-to-day management. And I do not see any crime if we call this tool money. Why shall we invent a bicycle? But no bicycle can be made responsible for where it brings us.

Toby said...

Austrians and gold, and gold-backed money systems throughout the ages, are essentially like the modern FRB system. High powered money (HPM) is FRB's gold. The contraints on creating ever more HPM are interest and debt. When there is gold as reserves backing claims on that gold (as commercial bank created credit money is a claim on HPM) this need not restrict banks from going beyond the set reserve ratio, as they do today. I would however concede gold is a more effective constraint than HPM, but Nixon showed what can be done in that department! Then comes zero reserves as in Canada + UK, but that is still the same system fundamentally, in that commercial banks make money by creating money as debt and charging interest. So the differences one can point at between the various schools are cosmetic in my view. I know this position is unusual! Oh yeah, we could say economic growth is modern money's gold, that which backs money, which itself is nothing.

So I like Soddy's definition of money: "Money now is the NOTHING we get for SOMETHING before we can get ANYTHING." This sets out the circle money is, and it is a circle which revolves around property (Soddy's "ANYTHING"), which is basically anything we 'own' or have a right to buy and sell. Your creditors don't only take your house, they take anything they can get their hands on. And there's more to it than that default/bankruptcy scenario. Cash (of whatever form) in your pocket can only be a claim on property, simply because money is used to buy stuff. Stuff can only be sold if it is property. Even if we fraudulently claim something as our property, say a tree in a field, even though there is no legal paperwork 'proving' this, the tree becomes property once money changes hands to pass ownership from one party to another. Without this exchange, money has nothing to do. I'm not being unfair here, nor radical. Money is itself a nothing whose power derives from our agreement that it can buy stuff (ie.e is a claim on stuff/property). Thus money is always and only a debt. It itsself has no use whatsoever unless there is property on offer for sale. Do you see what I'm getting at?

And I never suggested you agree with the text books. I was merely trying to lay out how our definition of money (whatever we agree on) embeds it in some system.

Otherwise I'm with you. We can indeed change the money system, and that is what I discuss here and elsewhere. From the sounds of what you just wrote, you might like Franz Hoermann's proposals which would radically democratise money creation and use. What I promote here are ideas I find more likely to meet with public approval, even though I suspect the more popular ideas are more faulty than the more radical ones. Popular ideas have the great advantage of being likely to be implemented. They then serve to soften the culture towards the radical, which is where my heart really lies! :-)

Игры рынка said...

I actually do not care about money :)

Milton Friedman advocated stopping publishing trade balance so that people stop worrying about it. What I would do tomorrow is stop publishing budget deficit. This will be the magic trick which will overnight switch political attention to important issues.

Toby said...

That's an excellent idea! Go for it Sergei! Who knows, maybe it will be precisely the kick up the arse we need.

However, and to be a sour puss, we still need a mechanism for getting purchasing power/and or the material basics to everyone. Not caring about money is fine when you're not starving, but millions are, and many of them would be helped by money, though millions would be better helped by, e.g., permaculture farming skills, like this guy is doing in Kenya:

http://www.otepic.org/

Together, we'll sort this mess out.

Игры рынка said...

Toby, I have nothing against GI and would also do it tomorrow. Plus employment guarantee (with of course higher income than GI). Employment guarantee is required to buffer insufficient government spending or excessive private spending (a-la MMT) once you stop publishing budget deficits :)

And some other ideas.

That is why I do not understand the problem of money. We have simply chosen it to be a problem.

Once you remove fiscal "issues" and employment from the radar screen of modern politicians, they will have nothing left to talk about. Such a "generational" change should trigger a big revolution in the minds of people.

Toby said...

I don't know how to effect an employment guarantee, especially while ensuring the employment is useful and meaningful. I prefer the idea of everyone being their own company and thus the end of employment contracts, with multiple money types to suit multiple economic needs. As a transition thing, anyway.

The problem of money is its logical bond with scarcity. However, this may be solvable, or rather, I'm no longer fully convinced money need be coupled with scarcity as it is now. But the argument is quite strong: Money, in conjunction with the price system, exists to ration out scarce goods and services to infinitely greedy market participants. If there were an abundance of everything, you wouldn't need that rationing mechanism. Abundant things (let's say supply always exceeding demand) have a price of zero, like air, and much digital content. You don't need money to distribute them. Thus money encourages scarcity and all the negatives scarcity generates (like poverty, greed and war).

The complicating factor is how to define scarcity and abundance, and not to idolise/demonise either. There is a scarcity of gold while we believe we need it to store value. There isn't enough oil/energy while we are so wasteful with it and don't invest in alternative energy sources nor in ruthless efficiency, nor in non-consumerist living. We can artificially generate scarcity (millions of empty houses and millions of homeless people) just as we can technologically and culturally produce/perceive abundance. Money keeps us pursuing scarcity because that's where profits lie, and this system is all about profit, which it idolises.

But all of this is in my (always soon to be finished and ever-growing) book, "The Meaning of Money". Coming to a website near you, soon!

Игры рынка said...

Toby, guaranteed employment is tricky but not impossible. Not more impossible than planting a useless flag on the Moon. By definition work is not scarce. Workers are scarce. And above all those who can pay for work are scarce.

There is hardly a scarcity of goods. Look at unemployment levels and utilization levels. Any developed economy can produce 10%-15%-maybe even 20% more just like that. Scarcity is a concept that was brainwashed into our minds with Econ 101. No (at least developed) economy in this world operates at its capacity. WWII showed that government deficits can be 25-30% of GDP and, oh miracle, it all worked! Maybe not super smoothly but it worked! Give it some polishing and it will work smoothly. And please remember that lots of that GDP was simply destroyed. Not consumed but destroyed.

So what scarcity do you talk about? Our only scarcity is our time to consume what we produce in a very limited time span we have left from producing. Too much time left to consume? Then produce more and the spare time goes down. Simples!

Listening to the remarks of Frau Merkel from yesterday I was wondering which planet she lives on. What does she mean when she says that we can spend only what we take in. Is she freaking CRAZY? We are not talking monetary affairs. We are talking organizational problems! And that is the problem that money was supposed to solve. Remember that textbook barter stuff?

Anyways, I am not saying that problems in front of us are easy. But I am more than confident they are not 5 orders more difficult than sending that Russian Yuri guy around the planet. The only scarcity we have is the coordination and determination (leadership) scarcity. The rest is pretty much fiction from econ professors and lecturers. And here we definitely have one super abundance. Unlimited wants... gimme a break!

ps. looking forward to your book!

pps. capitalism depends on profits. nothing more. but did you ever think how many losses capitalism generates? just curious :)

Toby said...

We agree on scarcity it seems.

My point was that money is a device for distributing scarce goods and services. Where they are abundant (= supply exceeding demand consistently over time), goods and services have a price of zero = no need for money to ration them out to the highest bidders = no need for supply and demand price discovery = no need for money. In other words, abundance means no need for money.


ps. looking forward to your book!
That makes two of us!

And yes, losses and profits are part of the zero sum thinking money/scarcity/price forces us into. Zero sum thinking is a cultural habit it will be very hard to break.

Debra said...

Hi guys,
Just back from La Réunion, where I spent three weeks in... paradise. (For those whose notions of geography are as skimpy as mine, La Réunion is a former French colony, now French department off the coast of Madagascar.)
I see you are busy at my (once ?) favorite topic...
I spent lots of FREE time (...) reading a book by Paul Veyne called "Roman Society".
Geez, I wish I could be (like..) Paul Veyne.
He is a French egghead with the good old days French education that I didn't get in the U.S., and a generalist thinker.
One of the chapters in his book discusses why it is impossible to qualify Roman society as capitalist, regardless of the fact that there was lots of property around, Toby, and lots of trade, too, and lots of.. profits, while we're at it. (Toby, in your exchange with Sergei, I think that you do not take into account the fact that money is used to buy... people's work, and that is NOT property in my book...one of the biggest problems we have at this time is the result of the work=money equation, the way we have tied them up so intextricably. Also, money as a symbolic system is also intextricably tied up in our perceptions of time, something we don't think about very often...)
I conclude that the capitalist system, by concentrating value in liquidity, has created idolatry of money/liquidity at this time, while excluding our ancient, important tie with the land as potential wealth. (The Romans, under the Republic, and under empire, attached consummate value to land as a source of potential wealth, and created a hierarchical caste system that worked quite well for them.)
It is interesting reading this book and comparing Roman attitudes towards wealth and money to our current attitudes. Lots of neat ideas come out of comparison, I think.
On definitions of money...
I believe it is impossible to conceive of a "descriptive" definition of money which is not.. prescriptive at the same time.
Any description contains the seeds of implicit value judgments. One is either aware of this... or not... but the implications are tricky.
Another important point, I believe : it is impossible to implement any decision that will not have.. disadvantages.
I'll think of other things later.
Time to go. :-)

Toby said...

Hi Debbie, it's good to have you back!

If we define property as that which can be bought and sold, then work which is bought and sold is property. This does not mean all work is property, only that work exchanged via money is property. As usual, it's an issue of definition. The book I mentioned (Eigentum, Zins und Geld) is very clear on this relationship of property with money and interest. The book is an extremely scholarly work which has been recognised with the high honour of being among the 650 seminal works of economics from ancient times up to the 20th century and was included in the top 5 most important books of all time on money by the Deutsche Bundesbank. The authors' definition of money as a debt-backed claim on property is seen by many as the first truly scientific definition of money ever made. So I'm not pulling this stuff out of my imagination (not that that would make it worse!), and I can assure you the book is very, very deeply researched and equally well argued.

Money is an emergent property of private property, as is interest. An 'unholy' triumvirate, if you like. Once we have these cultural concepts in place, things can become private property, from apples to horses to homes to work (or labour). Nothing is property uness we handle it as such. Everything handled as property is property. And this, in the fullness of time, leads to more and more things needing to becoming property as the economic sphere grows and grows into the non-economic sphere, as it must.

As for the Romans loving their soil, David Montgomery and Toby Hemenway (among others), as well as the data, argue otherwise. Their position is that agriculture per se is unsustainable, and its practice explains (via its above-normal soil erosion rates) the typical length of civilisations (500-1,000 years). Hemenway's definition of agriculture is a process of turning ecosystems and biodiverstiy into people (a.k.a. Perpetual Growth). Argiculture is expansionary by design, in that it is very portable and encourages people to procreate (this is of course a very bumpy process, but the pattern is clearly there). Portability: you go somewhere 'wild', chop down some biodiverse forest (slash and burn), and sow and reap until the soil is exhausted. Then repeat that process. There is an enormous amount of data backing this up.

Also, farming, which creates surplus to be protected (as we protect the farm against 'wild' nature), initiates the cultural and practical conditions necesssary to begin to conceive/perceive property and scarcity, which then give rise to money and interest/rent, which gives rise to state hierarchy and conquest and perpetual growth = ecosystems being turned into ever more humans. This is the pattern we are called on to break if we want to survive as a species this coming century or so.

Here are two hour-long presentations, the first by Hemenway, the second by Montgomery:

http://www.youtube.com/watch?v=8nLKHYHmPbo&feature=related
http://www.youtube.com/watch?v=sQACN-XiqHU

I read Montgomery's book "Dirt: The Erosion of Civilizations" a a couple of years ago. It makes for interesting reading and I recommend it highly. Both authors are strongly in favour of permaculture/horticulture as opposed to agricutlure. Where agriculture is necessarily a constant battle with nature, horticulture/permaculture is the co-creative cooperation with nature so as to produce genuinely sustainable living practices.

As for definitions of money, I'm beginning slightly to tend towards a very tight definition thereof, and anything which is not described by it is not money. Otherwise money can be anything at all, and 'constructive' discussions thereof become almost impossible. But I'm still far from sure about this. Language and the concepts it enables are just basically slippery. After all, Universe is analog, not binary! ;-)

Debra said...

On Roman attitudes towards land :
They somewhat resembled the European feudal system, to the extent that one of land's functions is to constitute a potential reserve of wealth to fall back on in times like our own, right now, Toby.
Forests are not farms...
And whether or not you are engaged in agriculture, you will almost inevitably be confronted with the observation that daily living involves doing actions that go against the "natural ?" processes. For example, the fact of sweeping the room must be repeated constantly because dirt accumulates.
There is no way to avoid this kind of repetition in our existences, although we can more or less choose to see it as alienating, certainly.
What you say about work being property makes it slippery to distinguish salaried men and women from slaves.
Indeed, I think that the slavery question is still behind our perceptions of work and money, even after all these years. Greco-Roman civilization, from what I understand, viewed work as the domain of slaves, not something to be valued at all.
It's good to be back, Toby.

Toby said...

Your point on slavery is exactly what this property thang is about (amongst other things of course), and David Graeber explores the slavery/property issue in great depth in "Debt: The first 5000 years". He is, by the way, well acquainted with the work of Heinsohn and Steiger, the authors of "Eigentum, Zins und Geld". At least, their works are evident in "Debt"'s bibliography, as is much of the arugmentation, which precedes "Debt" by over a decade.

Yes of course repetetive work is always there, even chickens pecking for food, or monkeys grooming each other. This is niether for nor against nature, it is maintenance, which is part of nature. Eating and egesting is repetitive. This is not an issue.

As for forests not being farms, if you look into permaculture (as I have just started doing) you'll see how the people practicing it leverage forest, water, weather, wind, animals, insects, plants, to minimize the amount of energy it takes them to sustain themselves and maintain their forest/jungle gardens. If you have an hour and twenty and can stomach the terribly cheesy music, you might find this introduction interesting:

http://www.youtube.com/watch?v=HjiQDmNj0Ro

An Austrian by the name of Sepp Holzer is revolutionising farming in Austria and southern Germany, and actually across the world, using his own brand of permaculture. He is quite a character, very stubborn, independent, learned everything from observation and doing rather than from schools and universities. He is convinced the planet can happily provide an abundance of food for all people everywhere. I find the whole project very exciting, and hope to get involved with it one day soon. Me, almost fifty, with next to no idea about plants and gardens etc., dreaming of stuff like this. Whodathunkit! Never say never.

Roger Lewis said...

Hi Toby,
Just stopped by to say hi,
Ended up reading all the comments as Well.
Food for thought as usual and a second and third reading likely.
Hope all is well with you and yours and hi to Debra too, La Réunion sounds lovely.

Toby said...

Hi Roger, thanks for stopping by. I've been both very busy and emotionally exhausted, deeply worried about what's happening 'out there' and about me and mine. I haven't spoken to Debra for a while, for the same reasons I just outlined. I hope she's ok, and I hope you are doing well too, Roger.