In this article I propose to explore the thesis that money is an inefficient mechanism as a means of
exchange in modern society. I will review the history of money to show how we
have arrived at our present position and discuss to what extent scarcity today
is caused rather than resolved by our monetary system. The mass availability
and low price of consumer goods, together with increasing environmental
pressures and costs of land and more stringent rules on disposal and waste, are
resulting in a shift of perception. Consumer goods are becoming devalued and
emphasis is shifting from the acquisition of goods to costs of storage and
disposal. There is evidence of associated changes in behaviours and organic
development of structures that operate outside of the money market, such as
time banks, swap shops, freecycle and freeconomy websites that reflect this
change of circumstances. I conclude with a speculation about how far this trend
might continue. Would it, in fact, make sense to consider a society where goods
are made freely available?
Until recently, the
majority considered the idea of opposing the holy grail of perpetual economic
growth as blasphemous. Now with climate change being seen as a reality to be
dealt with rather than a theory to be argued against, we are being forced to
face up to the facts – our present degree of consumption is unsustainable. If
everyone consumed at the same level as that of the average UK citizen
we would need 3 planets, and 8 planets if we all aspire to consume at the same
level of the US citizen. Clearly our policies do not meet the
criteria of sustainable development as defined by the Brandt report in 1987,
"development that meets the needs of the present without compromising the
ability of future generations to meet their own needs."
The response to the threat of global warming has on a superficial level been promising. There are endless
programmes on how to be green, most political parties are talking about some
kind of green taxation, and the European Commission is proposing targets to
reduce greenhouse gasses by 20% by 2020. However, the EC itself agreed with
scientists that emissions reductions of 25 to 40% were required to stave off
global warming, the prime minister is still talking about sustained economic
growth, airports are being given the go ahead to expand, new roads are being
built, there is little investment in public transport, and if the shoppers haven’t
bought enough in the new years sales, the economists continue to wring their
hands in woe.
The key question then is how can we reduce over-consumption of resources? This begs the questions of
whether our present system of allocating resources is efficient. Classical
economic theory based on Adam Smith’s ‘invisible hand’ would have us believe
that our present monetary system is optimally efficient. The basic premise is
that money enables resources to naturally flow in the area where they are most
needed; requiring only that everyone follows their self-interest in an
unregulated system. Prices of goods and services are governed by the
interaction between supply and demand, reflecting the strength of consumer
desire for them in relation to their relative scarcity and cost of production. Businesses
will choose the method of production which gives lowest unit costs, and the
product which offers the highest margin of profit. Thus the greatest possible
amount of the products which consumers desire is extracted from a limited
supply of factors. By simply maximising their profits businesses enable scarce
resources to be steered in the direction in which they can best satisfy the
desires of consumers. This assertion is beguiling – it promises that resources
will be optimally allocated without need for complex regulation or altruism.
However, by optimal, economists do not mean equal, they mean maximal. If we think in terms of
maximising relative utility, in the understanding that £1 to a poor person has
greater utility than £1 to a billionaire, then the system is inefficient. Vast
numbers of people have little or nothing, while others have far too much. We
may accept such a situation if people’s wealth reflected their usefulness to
society, but there is no obvious relationship between the usefulness of
people’s work and their monetary reward – in fact those who contribute the
most, in the sense that the work they do is incontrovertibly important and
necessary, are notoriously badly paid – nurses, teachers, farmers, cleaners. On
the other hand, those who earn the mega bucks tend to be financial brokers,
marketing people, footballers, sales people. According the Office of National
Statistics (2007) the highest paid people are CEOs and company directors. But
even here, the rewards are usually based on recent performance. Short-term
increases in profits can be achieved by slashing investment, laying off
workers, deferring payments and cutting back on R&D. The CEO presiding over
such policies will be applauded in the financial press as profits shoot up. By
the time the consequences of such disastrous policies are felt by the company
further down the road, the self-serving CEO has long since moved on to pastures
new amidst multi-zero bonuses, leaving his/her successor to pick up the pieces.
Another drawback of an invisible hand where profit runs the show is that our joint self-interest
suffers. For example, if it is more profitable to pollute, or to dump waste
then a company will do so. If it is profitable to lay off workers then a
company will do so, even if as in the case of General Motors in Flint, it
pretty well puts an entire town out of work. If it is more profitable to make
employees work long hours than to provide flexible working hours then a company
will do so. If it is more profitable to make a bad product than a good one a
company will do so – consider the issues around built in obsolescence, or just
think of Police Academy 8 or Speed 2! We all get to pay the costs of these
decisions, whether we be a company director or cleaner, when our rivers are
polluted, the air is thick with smog, we rarely get to see our spouse due to
unsociable hours, or our offspring can’t find work, when our mass-produced
goods break down and there’s nothing but reality shows and sequels on TV.
Vast resources are spent designing infinite variations on products – we have entire supermarket aisles
dedicated to different kinds of washing powder, endless money is spent
persuading us to buy one brand of cat food rather than another, retail outlets
proliferate, yet we cannot afford to provide sufficient beds for our sick. Our
teenagers hang out on street corners as leisure facilities such as ice rinks
are not financially viable, while casinos are. The best artistic talent in the
country earns its living by persuading us to associate this brand of car with
sex-appeal, that soap with eternal youth. On the other hand, important work
such as refurbishing schools, providing sufficient nursing care for the sick
and elderly, providing proper insulation for every home, filling in dangerous
potholes and so on, are not carried out due to lack of funds. Crime is so high
we have run out of room in our prisons, and many in poor societies have barely
enough to live, and on top of that we are destroying our planet with
over-consumption.
I haven’t yet touched ont he most pertinent fact. Almost everything we own – almost everything that we
have bought, that we store, that we maintain, clean, dust, insure and lock up,
we are not using. Of the millions of cars owned in the world, just a tiny
fraction are in use at any one time. The percentage of bicycles actually being
ridden as opposed to being locked up in sheds, or against railings is
miniscule. The number of yachts being sailed is a fraction of those in harbour.
Hoards of caravans are parked in driveways or fields. We have houses packed
full of stuff we are not using – piles of CDs, books, toys coats, tennis
rackets, masks and snorkels, flower pots, tools, suitcases, games plus a mixed
bag of things we rarely use but hesitate to throw out in case we might need
someday.
Our present free marketm onetary system clearly leaves something to be desired in terms of achieving
optimal efficiency and the best possible social outcomes. The next question
then is what alternative systems present themselves? Historically humankind has
developed a number of socio-economic systems to allocate resources. Capitalism
and communism are two of the key systems that have been tried. They have both
had their problems. Communism has been associated with strong state control and
suffered from inflexibility and bureaucracy. Capitalism and the pursuit of
profit results in vast differences between rich and poor and the
externalisation of the environmental and social costs of production. Both of
these have developed in an environment where scarcity of resources was a
problem to be overcome, and money has been the means of exchange. For example,
where goods are in abundant supply (e.g. stones, air) using money as a means of
exchange would cause unnecessary work and result in a less efficient means of
access to resources than everyone simply helping themselves.
Technology and more efficient methods of production mean that there need be little scarcity. With
many products such as certain foodstuffs, cars, and wine for example, the issue
is not how to produce sufficient for our needs, but how to maintain a false
degree of scarcity in order to drive up prices and profit margins. Most
mass-produced consumer goods are so plentiful that it’s cheaper to throw an entire
appliance away rather than pay to have it repaired. Furniture that our parents
saved and scrimped for is now making its way to the next generation who have no
room for it, but hesitate to throw it away as it was once worth something. But
in reality it is worth less than the space it occupies. We are encouraged to
buy more and more, flights for a penny, three t-shirts for a fiver, jeans for a
pound from Tesco’s. The trouble is that we don’t have the space to put it all.
In the UK as in many other countries, land is the main thing that is
currently the scarcest resource, so we are no longer able to freely dump our
excess goods. As landfill sites fill to bursting, more and more regulations are
coming in to control our waste. There is the WEEE directive – all electronic
and electrical waste should now be recycled. Individuals are still (for the
time being) able to offload stuff at the municipal dump, but companies are
being charged more and more, and fly-tipping is at a record level. There is
talk of charging for the amount of waste we produce, via council tax
mechanisms. Will we start to see people creep around at night to fill up their
neighbour’s dustbins? The fact is that it is beginning to be the case that it’s
almost as expensive and time consuming to get rid of stuff as it is to buy it.
This is where I ask you to think outside of the box and follow me in a thought experiment. Would it be
possible to ditch the idea of private property and abandon money as a means of
allocation of resources? Think of all those factories producing these goods,
chucking out emissions, transporting goods to shops, heating and cleaning those
shops, the advertising of the goods, the labour spent making the goods, the
shopkeepers, the till operators, the plastic bags to carry goods home. And we
the purchasers are spending our hard earned cash buying things to keep at home
and rarely use. Imagine if all of these things were freely available. We could
just help ourselves. No bookshops, just libraries. No clothes shops – just
clothes libraries. We’d make space for those items we use all the time, and our
favourite jeans and for our underwear obviously, but would we bother to hoard
piles of shoes and raincoats and hats and gloves and ski trousers and evening
gowns and suits if they were freely available? For example, I keep the odd
envelope in my drawer, but there’s no point filling up my precious bit of space
with stationary when I can just help myself to what’s in the stationary
cupboard as I need it. No bikes in sheds or cars in drives – just cars and
bikes freely available for anyone (with a license) to drive when they want.
We’d only need a fraction of the cars to serve the entire population. Just
think of all the space that would become available - we wouldn’t need a
driveway or parking space for every house. We wouldn’t need huge car parks. We
wouldn’t have to inch along roads narrowed by endless parked cars. Now that
space is really at a premium, this alone would release miles of it.
Private ownership can also be a bore. If you buy a decent bike for example, you must be perpetually on
guard against theft. In the end, by the time you’ve erected a shed, fortified
by padlocks, and bought a D lock, it’s so much effort getting your bike out
that you might as well have walked. Cars are even more trouble, the expense of
maintaining and insuring the car is considerable. If it doesn’t work one
morning you are stuck. If someone casually breaks your window to steal your new
car radio, it’s not worth claiming once the excess and loss of your no claims
bonus is included. Think of more prestigious goods. At the moment only a few
can afford their own boat. But if they were freely available, everyone could
have access. There is little genuine scarcity – it’s a pseudo scarcity
resulting from the insistence upon individual ownership. A system that allows
everyone to have access to the best goods, with no one losing access, and which
results in a net reduction of goods being required by several hundred percent
seems to me a much more efficient system than the one we have at the moment.
Of course you may ask why would anyone work if everything were free? Well there would be a lot less work
to do. If we took the idea to the extreme and did away with money completely,
we’d do away with accountants, insurance companies, tax, welfare system,
advertising, marketing, financial advisors, sales, cold callers. As we’d only
need to produce, transport, package and provide just a fraction of goods in a
world where they were freely shared, we would also need correspondingly fewer
shopkeepers, manufacturers, managers, cleaners, lorry drivers – the list goes
on. Much crime arises out of poverty or by the desire to get something for
nothing. Crime would therefore drastically reduce, and with it we’d need fewer
police, lawyers, prison staff and so on. In fact I’d be surprised if we needed
to work more than a ten hour week to provide everything required to keep the
new society ticking over.
There would be psychological changes too. Whereas acquisition of material goods was associated
with wealth and status, this would now change, and status would be based on
what you did for a living. With increased leisure people would develop hobbies,
and the distinction between work and play would break down, much as it did with
the upper classes in the 18th and 19th centuries.
Skilled professions would be high status and many would still aspire to be
doctors, dentists, nurses, teachers, artists, mechanics, gardeners, scientists,
politicians etc. and would be intrinsically motivated by their desire to
contribute and the status attained, as only the qualified would be allowed to
practice. With the unskilled jobs that no one wants to do, it is not beyond the
wit of Man to come up with some kind of community service rota, or the
invisible hand can be put to good use trading off demand for some jobs against
supply of such work.
Well we should be quite along way outside of the box now, and reality is probably
beckoning in the form of the question – well that’s all very well, but how do
we get from here to there? Or perhaps, what has the author been smoking? The
complexity of modern global society is such that the revolution in thinking and
practice required to change the system are mind boggling and frightening. Each
point made would justify a chapter of its own to explore all the possibilities,
difficulties and potential solutions. The point of this article is not to
answer all questions and present a perfectly formed and complete picture of an
alternative society. The problem of allocating land for example, hasn’t been
touched on. However by raising the question, the initial step of introducing
more flexibility and awareness into our mental structures can be taken.
It is important to realise that the question of how we get from here to there does not need to be answered
in order for the journey to begin. No one planned our present system. Rather it
evolved in a hotchpotch manner to solve the problems of the time. We solve one
problem and it produces in its wake a host of other problems which we then try
to fix. In the meantime the original problem no longer exists, but yet a whole
system has emerged from it. For example we developed bartering as a means of
gaining access to more resources than we could access alone. Bartering though
involved transportation of heavy goods and was limited in flexibility. Money
therefore developed as an alternative to bartering and provided a flexible
means of exchanging scarce resources. Technology has now overcome problems of
scarcity with respect to most goods, so the original problem is removed. In the
wake of technology solving the problem of scarcity follows a new problem of
over-consumption and shortage of space. Ironically then, the current capitalist
system which relies upon perpetual economic growth and constantly increasing
consumption in fact generates scarcity as a logical by-product of its dynamic.
We are now consuming resources faster than the planet can replenish them, a
situation that is inherently unsustainable.
A system which is based on outdated problems will be artificially propped up by entrenched interests,
deep-rooted habits of thinking and institutionalised norms for a while - the
structures developed to deal with the initial problem (i.e. legal structures,
mental concepts and schemas) have so far not altered. However
there are signs that things are beginning to change to reflect the changing
realities. There have always been critics of the dangers of our present system,
sometimes from an unlikely source as the following quote illustrates: ‘We are capable
of shutting off the stars because they do not pay a dividend’ (John Maynard
Keynes, 1933). Schumacher a post-war economist opposed neo-classical economics
in his writings based on Buddhist ideas, ‘Small is Beautiful: Economics as if
People Mattered’. In his books he develops ideas that came to be known as the
‘new economics’ pointing out the unsustainability of our present system and
recognising that money can also be a hindrance. Building on this tradition
the New Economic Foundation focuses on well-being rather than financial
measures of success, and is exploring new ways of measuring progress and new
forms of exchange or currency. Classical economics is also having to make way
for more people-oriented, and less money-oriented approaches such as behavioural
economics and ecological economics. Our attitudes towards money and work are
beginning to change, and such ideas are now reaching a more mainstream
audience. For example, the Government is also picking up on this trend and
exploring the use of alternative measures of a society’s well-being other than
its GDP. There is a new breed of entrepreneurs emerging too – social
entrepreneurs who are driven by the desire to found businesses, social
enterprises whose primary aim is positive social/environmental outcomes, where
money is relegated to being a means to this end rather than an end in itself.
This is the fastest growing type of enterprise. In 2003, for the first time,
The Global Entrepreneurship Monitor included extra questions on social
entrepreneurship. They found that more people were involved with socially
oriented start-ups or own or manage socially oriented ventures (6.6% of
the UK’s adult population) than were involved in traditional economic
ventures (6.4%).
Alongside eBay, there is now ‘Freecycle’ a
website where people offer their stuff for free. Numerous swap shops
proliferate on the internet where the emphasis is on exchanging goods rather
than buying them, for example BookMooch and
Depop – a platform where you can buy and sell clothes and accessories, but some users also offer to swap their clothing. In local high streets, there are more second-hand shops than there are conventional retail outlets. I’ve also noticed the proliferation of Time Banks where communities swap goods and services with each other; there are now over 100 of
these in the UK. I heard about a new trend where people buy books and
instead of keeping them on their shelves, just leave them on trains and at bus
stops for the next reader. A website, www.readprint.com provides a huge
selection of books free online. Product
service systems is a new concept where you get to use items such as clothes,
tools and toys without having to own and maintain them. For example, La Leche in
the UK runs a maternity clothes library, where for a fee of £2, expectant mothers can borrow clothes for the duration of the pregnancy.
There are also ‘community bicycle schemes’ which have been run successfully in many European and US towns where bikes have been made freely
available for anyone to use. There is now a company called 'YoBike' which
provides a system where you can sign up to a scheme to either subscribe to
Yobike for a year which is £39 and allows 2 hours of cycling every day, a £5
day pass which is 24 hours of unlimited cycling, or £1 pay as you go, which
allows one hour of cycling. The Yobikes are dotted around the city and allow
for easy access to users. Cars are now
available in Southampton and many other cities via WhizzGo where, for the price of membership, and a refundable
insurance deposit, you can get access to their entire fleet of cars in all
cities which have signed up. All you then have to do is turn up and drive. They
only permit those within the ages of 30-65. Intellectual property too is now
also starting to be shared. A novel development is a consortium of five
Multinational companies who have an open IP exchange with
respect to green technology.
By being alert to alternative structures such as these that are developing outside of the
monetary system, we can begin to see ways in which humanity might start to
shrug off the monetary system organically through the gradual proliferation of
projects that operate outside of the money market. Rather than struggling to
artificially maintain scarcity out of blind habit, we could instead embrace the
new possibilities. With many goods such as music, films and software, vast
effort is spent in trying to restrict access in order to charge for
the product. Instead of fighting the trend and branding an entire generation of
downloaders as criminals, the industry could take a different approach and
allow free access. In the 1980’s for example, frustration with the culture of
the computer industry that had begun to copyright everything in sight, led the
American software freedom activist, Richard Stallman to launch the GNU project to create a free
operating system, and in the process started the free software movement. Now
shareware, open source and freeware are all widely available.
I have posed the question whether money should now be seen as a solution to a problem that no longer
exists. If so then money may have outlived its usefulness, such that the
consequences of the monetary system based on private property now outweigh its
benefits. I admit to some hesitation in submitting this article which
challenges the current orthodoxy so thoroughly, but the environmental and
social costs of continuing with a system that is sustained simply by its
historical momentum rather than by its usefulness to humanity are so huge, they
dwarf other considerations. With global warming we confront the biggest problem
that humankind has ever had to face. The scientists and the campaigners are
tearing their hair out with frustration because, while everyone is happy to
talk about changing their light-bulb or turning their TV off, at heart we all
hope it can be business as usual, and if the scientist’s models are to be
believed, that is simply not true. Faced with the destruction of our planet
through over-consumption, I make no apology for questioning the status quo:
perhaps money is not making the world go round – in fact quite the reverse.
The author would welcome
your comments and views
