Money Literacy – Part III

Editor’s Note: This Part III of a series. Before continuing, please read Part I and Part II, if you haven’t already.


A small economy joins the big economy

In the last part of this series, we saw that linking a big economy to a small economy is by no means an innocent act: naively, this might be regarded as just ‘giving everybody more choice’, i.e. more options for trade, hence more ‘freedom’. But everything works in two ways: one cannot link a big economy to a small economy without linking the small economy to the big economy. So, this will simultaneously give the big economy a strong handle on the small economy. What would in principle prevent a small population of economically powerful participants in the big economy from using their sheer weight to e.g. buy up key resources such as land in the small economy? This is not a purely theoretical issue – we see such processes all around us. Note that this is practically bound to happen if the big economy keeps on generating major internal pressure to "grow". And, as one cannot separate a culture from its economy, this effectively means that the largest aggressive-expansive economy, that of the culture called "western civilization", keeps on re-programming other cultures’ economies, and eventually these cultures themselves. Might that even be called ethnocide?

There is one point in this whose crucial importance is often overlooked: expanding the options for trade – easily sold as "providing more freedom" – is reasoned to be harmless, as trade is assumed to be voluntary. Now, ‘voluntariness’ is sometimes regarded as a fairly elastic concept: there are many subtle ways to generate pressure, with the most effective ones being those where the people actually making the decisions that cause pressure are largely unaware of it. Starting from a situation where a big and a small economy just came into contact, an important step to facilitate trade between them is to establish a currency to be used for that exchange. Naturally, this will be the bigger economy’s money. So, from the perspective of the bigger economy, it would be very advantageous if everybody in the smaller economy were compelled to use the big economy’s money. But a need to use some specific kind of money can only come from a novel need to earn that particular money – it has to be novel, because there was no use for the big economy’s money in the small economy before they came into contact. The catch is that a "need to earn money" is always an aspect of non-freedom. So, in order to attain the freedom preached widely (essentially an expanded spectrum of options of what to spend money on), people are often forced into the non-freedom of having to use that money, and having to earn that money. Evidently, the term "freedom" is easily misused. Isn’t the freedom to choose a way of living – maybe just temporarily – where one does not have to earn "external money" an important one? Here, the concept "external money" is broader than that of "money imposed by a big economy": money, after all, was not created by God [1], but actually is just a social convention that comes with a number of rules that are in principle open to design. "External" money is any money where the user has no way whatsoever to influence the design of the rules of the game.

To a culture, a very direct measure of the degree of (loss of) self-reliance is the aggregated need to earn external money. So, if "freedom" is an objective, then, evidently, a very good use of money is to invest it to reduce the need to earn further money. This in itself is an important idea in permaculture, but it in addition has a number of other benefits (only superficially unrelated – if you do one thing really right, more right things will happen automatically): reducing heating bills by insulating one’s home not only produces more financial peace of mind. Note, however, how this runs totally counter to what one is implicitly told in western culture to use money on. So, as a thought experiment, what would happen if we all came to our senses this instant and made it priority one to spend money on everything that makes us less dependent on the (discomfortingly wobbly) economy? To the Gross Domestic Product, that might be a nuclear meltdown scenario – but this just shows the inappropriateness of this concept. In part, this problem already exists, and is being dealt with in quite an ingenious way: home-owners stop paying rent, hence if more people owned homes (which would be quite easily achievable if we allowed more modest dwellings), that would make a serious dent in the GDP – if we would not have "imputations". If you own your home, then for the purpose of determining the GDP, this is counted as you paying yourself the rent you would otherwise pay. The bizarreness of this entire concept has to be brought to wider attention, and art can play a major role in this. Let’s be creative: a ballpark figure for sexually active couples is to have intercourse about 100 times per year. Assuming for guesstimation purposes that roughly half the population are sexually active couples, that brings us to 150 million people x 100 sexual encounters per year. If, instead, couples paid one another, say, US$200 each time for that service, a staggering total economic value of three trillion dollars would have been produced from this alone! Evidently, we cannot let this go unaccounted for. Total US GDP, by the way, is about 14 trillion dollars, including – of course – housing and other imputations.

Continue to read Part IV

References:

  1. See, however this quite amusing old article from the Journal of Irreproducible Results: http://www.iijournals.com/doi/abs/10.3905/jpm.1981.408810 ("In the beginning, mammon created commerce and industry. And the marketplace was void and without form, and illiquidity was on the face of the balance sheet…")

 

Related

Popular

4 thoughts on “Money Literacy – Part III

  1. I see no need to put “freedom” in quotes. Was physical violence, the threat thereof, or fraud used against you? If no, then you were not forced, and you were free. Terms must be defined if anybody is going to make any sense.

  2. It is very true that freedom is often misguided and applied selectively. In truly free market, money itself would be free, not subject to decree and legal tender law. Everyone is free to associate and use any form of money the wish. No one is compelled to use a particular form. Of course, a seller is also free to accept only some kind of money and not others. But the buyers are also free to buy from others. At the end of the day, the market forces of supply and demand will balance and some form of money will emerge as the favorite. If we look back in history, these are gold and silver. It would be interesting to see if civilization can come up with alternative forms of money. Ironically, such alternatives would only be possible, again, in a free market.

  3. The takeover of new economies by old is of course exemplified by the possibly fanciful story of the Spaniards and their Hat.

    When they wanted to convert the South American population to their economy, they simply made it a law (infringement of which was punishable by terror) that the indigenous population wore a hat. The hat was manufactured by the Spanish, and of course had to be purchased with Spanish money. In a single stroke the native population was placed in a situation where to not have money would lead directly to their destruction. Conversion achieved. A very clever and simple idea.

    “An offer you cannot refuse.”

    There are many modern equivalents, and your piece is a salutory reminder.

    Thanks.

    Nigel

Leave a Reply

Your email address will not be published. Required fields are marked *