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