Making the world go around

Jan 03, 2011 Editorial

As we rummage through the detritus of our holiday excesses, it will be hard to escape the topic of money. It will be even harder as we confront the excesses of the new elite in the year ahead. So let us talk a little about money.
What is it really, apart from its acquisition being a source of tension? The economist Peter Johnson offers a perspective that insists money arises with the competitive market and is inseparable from it.
Money only exists and has value if it is accepted as a unit of calculation, and it is only accepted if it is believed to have value. If we stop using it, it ceases to be money: the value is in the repeated use alone. Money is the social glue that holds the real market economy together and can’t be abstracted. It has no existence without the real economy and monetary problems can’t be tidied into a corner and fixed separately.
Money embodies the Cartesian idea of making rational calculation the measure of our desires and needs. For this, only its quantity is important, and since we need money to participate in markets, we must constantly replace what we spend on things, sustaining the illusion that money has objective value.
These factors unite to reduce a complex multitude of desires to a single desire for money. An irrational passion – avarice – masquerades as perfect rationality. In this way, how we use money reflects how we think.
Now ‘avarice’ is an emotive and tellingly archaic term, but the point is that it is not just an unfortunate moral blemish: it is built into a world where social exchange is done with money.
The central expression of avarice, however, is interest: the exchange of money for more money. Interest subverts the social function of money as a unit of exchange, and this is why many early societies instinctively forbad usury.
The taboo on taking interest was gradually and casuistically lifted, to the point we have now reached, where the business of taking interest – from consumer debt and company loans to derivatives and futures – has become the crowning achievement of our economies. But, as with money, there is no coherent naturalistic explanation of interest. It is a social convention driven by avarice and applied to money that is so engrained that we can’t imagine life without it.
Authors from Aristotle and Acquinas to Marx and Keynes were acutely aware that our economies had evolved to give greed a free reign and that this was harmful. Many hoped it might be possible to tame the beast.
Keynes, writing after the Crash and partly in political opposition to communism, thought that better social control might enable capitalist markets to produce desirable outcomes without the drawbacks.
There has been much talk about this recently too, but little evidence that the system can be tinkered into a better shape. Why? Were the adjustments bound to fail, or were they just not quite right?
The prospects for a better capitalism are not good. The logic of competitive greed is to circumvent rules by any means possible so long as there is a right to free contract, and a right to free contract is the foundation of markets. For this simple reason, avarice (what we now call a culture of excess), may be obstructed but can’t be prevented by regulation. Only banning certain kinds of contract – in effect eliminating the associated markets – can make a difference, and this would be fiercely resisted. Politics has no appetite to take on markets.
This matters, because markets are self-contained, indifferent to the fate of those outside. The purported laws of the market drive companies to the wall, people out of work, destroy the environment, and leave five sixths of the world’s population in avoidable poverty.
These things happen because the kind of calculation that goes on in markets is just the kind of calculation that only goes on in markets: the rational maximisation of personal utility, measured in money. This conjuring trick is the moral content of markets.

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