The Meaning of Money

[Note: edited “rent” to be “credit/debt contracts, collateral”, 24.05.2013]

I’ve decided to risk outlining the basic thesis of the book I have been working on these last four years or so. When I started writing it, I knew roughly that I wanted to take a systems theory approach to money and money’s effects on society, and knew too I did not know where my research would take me. Years later I feel like there’s something solid and clear to be expressed. The book – which is about two-thirds finished – currently runs at just shy of 100,000 words, so what follows here is the briefest of synopses. However, because I get good critical feedback from my generous readers, and because I believe the basic thesis is now solid enough to be expressed clearly and briefly, I’m testing the water here at Econosophy.

First up, systems theory. I use Fritjof Capra’s definition of a system: “an integrated whole whose essential properties arise from the relationships between its parts” (1997: 27). The key words are “arise” and “relationships”. Systems theory is an attempt to go beyond the causal linear chains of Newtonian physics and the binary dualism of the Cartesian paradigm. Instead of A to B to C to D forever, systems theory sees loops, more exactly positive or negative feedback loops, consisting of relationships between ‘parts’ that form systems which give rise to new properties that cannot be predicted by looking at the ‘parts’ in isolation. A negative feedback loop is ‘good’ as it is self-correcting, a positive feedback loop is ‘bad’ as it self-destructs. So, in systems theory nothing makes sense in isolation in a universe composed exclusively of systems/networks, right down to the sub-atomic level: “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, 1971). Thus there are no discreet things, no objects per se, only networks of relationships. In place of causal linear chains of discreet objects impacting each other like billiard balls on the baize of time, we have in systems theory A to B to C to D to A, a closed loop that creates a system, an “integrated whole” in which each ‘part’ is itself a system of further relationships, no matter how deeply down we drill. And we cannot really say where the system starts. I could equally well express this loop as C to D  to A to B to C. That said, this does not imply pure randomness. There is progress; crawling before walking before running, etc.

Classical and neoclassical economics are Newtonian-Cartesian in their thinking. They posit a fundamental building block, termed homo economicus, hard-wired by nature to maximise profit via “truck and barter” trading in a universe characterised by irresolvable scarcity and “red in tooth and claw” competition. Homo economicus is infinitely greedy, too, so unless we want a Hobbesian “Warre of each against all”, we need things like money and markets to produce civilisation. Homo economicus is intelligent and inventive, so was able to solve the problems of inconvenient barter (the instinct to barter is in his DNA) by inventing money. Barter is mighty awkward. How many eggs for a course in cabinet making? How many pounds of pork for a new roof? Life was hard and primitive, then came money. Since then, albeit with bumps along the way, things have been getting better and better. In short, money makes civilisation possible. No money, no civilisation.

The conventional view is a fiction. The real story is far more complex..

The definitive anthropological work on barter, by Caroline Humphrey, of Cambridge, could not be more definitive in its conclusions: “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnology suggests that there never has been such a thing.” 

(Graeber, 2011: 29)

At root, [findings from ethnology and history] tell us that profit-seeking exchange does not exist [in pre-money societies], that such cannot therefore be a property of the human species. 

(Heinsohn and Steiger, 1996: 40)

Homo economicus is thus simply an unproven assertion, a purported foundational building block required by orthodox economic theory. Without this foundation, the entire structure built atop it crumbles. So, how did money emerge? It’s not easy answering this question, because the past is dead and gone, but it seems the systems money’s emergence requires as pre-conditions are: equivalence as established by numbers and counting, the state, private property and interest (usury). Graeber would add warfare and slavery, and he’s probably right, but for brevity I’m going to keep it simple. In this simple view, a systems theory take on the emergence of a money-based system (or property system, or state system) might be this:

Private property-->state-->usury-->money/markets/price-->private property (where numbers, counting, equivalence, slavery, justice and war/expansion/conquest are in the mix too)

Note that markets arise with money and property, that the fundamental State-Market (Left-Right) antipathy the status quo propagates is thus Kabuki theatre. State and market are joined at the hip, by money and property, are thus part of the same system. We do not have truck and barter (primitive markets) until after human societies have passed through all sorts of stages to arrive at some form of state, in which private property (as distinct from ownership, a critical distinction to do with credit/debt contracts, collateral and interest) has emerged and is used for increasing one’s own wealth and security. Probing into what comes first isn’t as helpful as understanding that these interrelationships are vital to sustaining each ‘part’ of the system. To quote Fransisco Varela, “World and mind arise together.” It’s not that world causes mind or vice verse. They co-create each other. 

There is something about the process of an intelligent animal with opposable thumbs experimenting with fire, planting seeds and taming animals that leads to home and hearth, which leads to tribes, then chieftaincy, which leads to state, property, interest, money and markets. Yes there is a certain progressive linearity to this process, but it is also true that not all human societies develop in this way. However, if there is money, there will be private property if that money is going to be helpful to the functioning of that society. For example, Heinsohn and Steiger (1996) argue and cite research clearly showing that state communism failed because it had money and banks, but no private property. An essential ingredient was missing and thus the system fell apart. There are of course other factors in the collapse of state communism, but this deep systemic incongruity was instrumental in that system’s demise.

To repeat, a systems theory look at money and economics, in conjunction with ethnography and history, shows that money is not an invented, discreet thing that possesses value and that makes previously awkward market trading (barter) efficient and profitable. It is an emergent property of societal development on the trajectory of increasing control. This trajectory is what Eisenstein calls Ascent, but that is the topic of other blog posts (and of course Eisenstein’s The Ascent of Humanity). Money’s continuing existence requires the continuing existence of private property, state and usury, and vice versa for each of them with equal weighting. Each ‘element’ sustains and require the others. They co-create each other, where each is a complex system too, with further interdependencies bleeding into and out of them, such as war, fear, scarcity and greed. Property-based societies are also, in my opinion, fear-based societies.

What we do not see is evidence that homo sapiens sapiens has a market-trade gene, so to speak. Pre-state, pre-tribal societies, or hunter-gatherer societies, are characterised by egalitarianism and sharing. This does not mean some hippy, airy-fairy Nirvana; there was fighting, murder, etc. Gorillas and rhinos are not predators, but will smack you up real good if you threaten their safety. My point is that humans are not hard-wired for greed and profit maximisation via market trading. There’s no good evidence to support this assertion, and plenty pointing at the opposite conclusion. We adapt to the society we are born into. For most humans today, that means a nation state of one flavour or another, with money and markets and usury running the show, more or less. You could say we are hard wired to be flexibly adaptive to a multitude of different circumstances.

In The Early State (eds. Claessen and Skalník, 1978), approx. 20 historians examine the birth of the state in various parts of the world to determine which properties are common to them all. Their combined work attempts to define the state, which exhibits several common qualities regardless of the form it takes: monarchic, fascist, democratic, etc. One is that it is necessarily hierarchical or class-based, with rulers and ruled. Another is that the state is expansive. States seek to expand their territory, probably because they are productive; humans reproduce in response to the security offered by future expectations of sufficient amounts of food and shelter (in the absence of women’s rights, education and other factors), and population growth requires more territory. The state is thus ‘wired’ to grow as a direct consequence of this biological tendency and the fact of the state’s hierarchical structure and productive capacity. Because it is hierarchical, it primarily benefits, in terms of distributing the wealth it produces, those at the top of its hierarchy, leading to tension, envy and repression. There is thus a constant need for an external enemy, for dehumanising some convenient Alien Other as a way of redirecting the violent potential this tension engenders. 

This may seem like Marxian analysis, but that isn't particularly relevant here. What matters to my thesis is the neat fit of usury, private property, money and state as co-contributors to a growth-based, expansionary and rapacious system. Recall too that usury/interest is exponential growth by definition. On a finite planet, the state therefore has a sell-by date. We are, in my opinion, currently approaching that sell-by date.

In this thesis, then, there can be no money without state, private property and usury. Logic then suggests that when growth has to stop for environmental reasons, state, property, money and interest may have to stop too. Or at least be radically transformed.

And there’s the rub. Systemically speaking, we are the state. The state is made of us; without humans, there can be no state. Our entrained habits of thought mean we can barely imagine anything different to today’s system. Nevertheless, transitioning from property-based social organisation to resource-based social organisation requires a new paradigm, new thought patterns, new perceptions, new consciousness. And on top of this inexorable pressure towards fundamental change we have technological unemployment, which slowly renders humans less and less relevant in money terms; our labour becomes less and less ‘valuable’ over time. Exacerbating this piece of the puzzle is our stubborn cultural sense of value. Because of money, we have money-based ideas about what is and is not valuable. Money is, in part, a kind of nothing that happens to commoditise everything, including human work and itself. This inescapable commodity effect has helped us to conflate money with wealth. Society today is about making more and more money in the belief that doing so produces the best of all possible worlds. Money ‘decides’ what gets done and what doesn’t, even though society, on the whole, does not even understand what money is.

Money and price are of course inseparable. Prices appear to tell us the values of things, but value is far more complex than a number adjacent to a symbol (e.g. $) can possibly convey. And yet we grow up and live in a system which prices/values our contributions (labour) using money. We believe, typically speaking, that we are as ‘valued’ as our money-worth suggests we are. This unfortunate correlation means that people Just Know e.g., no one would do any work if there were no money offered in exchange, that work must therefore be unpleasant. We seem to viscerally believe that money makes the world go around. It certainly helps make this system go around. Can we imagine a system without money and price? That daunting task is the beginning of surviving the demise of the property-money-state-usury system.

The system we are is in the depths of a fundamental and final breakdown. The deep change required of us by the end of growth is, I suspect, the most profound humanity has ever faced. We must upend and rethink almost everything we think we know, to have a chance of dealing with this new set of circumstances. Let me repeat; we must change the way we think about and perceive reality to survive. That is a very tall order. Sadly, our education systems produce bickering children we mistake for adults. Our politicians and other ‘leaders’ are either ignorant or narcissistic or too busy/afraid/locked-in to push for change. We children, we emotionally immature physical grown-ups are tasked with redefining our very way of being. People say Occupy failed. Occupy is the merest beginning of what we have to accomplish as a species, globally, if we are to survive. The Zeitgeist Movement and The Venus Project represent an analysis (and perhaps a plan in the case of the latter) that could offer a basic methodology around which real change can be put in motion. There are other efforts out there pushing for change too, but little agreement among them, and more importantly, little opportunity to work together.

It can be no other way. We’re not ready for this. But then, I was not ready to become a father. How can you be ready for something you’ve never done before, let alone something so new no one even knows how to start? Franz Hörmann’s “information money” is one proposal among many. Strictly speaking, “information money” would not really be money as I have laid out here. I see it more as an idea-crutch to help us transition towards the new. Something like it is needed. 

Whatever it is we contemplate and propose, my hope is that we properly understand the ramifications of what is afoot. If we underestimate the enormity of the challenge, our chances of success, currently slim at best, become vanishingly small.