Wednesday, October 06, 2010

Money: a weird idea

In Promise Merchants, Noni Mausa writes:
Let me remind you what a very weird idea money is.

The IOU is a simple idea. Money is like an IOU, but carried beyond the boundary of reason into an entirely different and peculiar territory.

If I write an IOU, it has my name on it, your name, perhaps a date, and some indication of the future services which are owed between us. It's a minimalist contract, easy for anyone to understand.

But money is an IOU, a promise, with no names. The future benefit is merely an abstract number whose value is not defined. A dollar does not equal a loaf of bread, or an hour of babysitting, but is determined by the usage of all the people who accept it.

This is almost theological in its weirdness.
Almost theological, but not quite. Money is basically a debt against everyone, a promise made by the whole society to each other as individuals, i.e. as they individually hold money. That individuals actually do physically own commodities, and can physically provide them on demand. Money doesn't have intrinsic or objective value, but we do have sophisticated social institutions (governments, banks, the Fed etc.) to ensure that we can have reasonable and consistent expectations about how many loaves of bread or hours of babysitting a dollar will buy, now and in the future.

Mausa notes that "An economy built on promises -- a capitalist economy -- only functions when these promises are enforced, and enforced multilaterally on all participants." I have no objection if she's using capitalism here as an example of an economy built on promises, but I would definitely object if she were defining capitalism as an economy built on promises. Every economy is built on promises, even a pure direct barter economy: there has to be some promise that I can physically enter the marketplace without my goods being forcibly expropriated.

Her fundamental point is still sound: however the promises are structured, they have to be enforced and they have to be enforced on everyone. I would add that there are as well constraints on the structure of promises, i.e. what kinds of promises are enforceable and under what circumstances. A structure of promises can be enforced, and — in theory — multilaterally enforced, and still be just as exploitative and oppressive as a society where promises are differentially enforced. As Anatole France famously quipped, "The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread." The notion of universal enforcement is a perfect example of a partial "bourgeois right", a right that is necessary but not sufficient to create an equitable society.

This point is the crux of Lenin's observation in The State and Revolution that no government can stand "outside" society to enforce promises on everyone or structure the promises to be equitable. Government is part of society; one more arena in which individuals and classes struggle for advantage. The notion that a government can do the right thing just because it is in some abstract sense the "right" thing to do is just as inept as the notion that a corporation, responsible to its stockholders, can do so. Every government acts according to its own interests: the interests of its members and the interests of those who control its membership. I would add too that it is equally impossible for the press to stand "outside" society: Like any other group the members of the press act in their own interests and the interests of those who control its membership.

Liberal economists complain: why isn't the government doing what we know they "ought" to be doing? Why is the press generally failing — egregiously — to accurately and truthfully report our true economic and political situation? Their questions were answered 150 years ago by Marx and amplified a century ago by Lenin: The government and the press are part of the material dialectic of history; they cannot in any sense stand "outside" it and act without regard to their own material interests. It is of course equally true that a Communist Party cannot stand outside society; a Communist Party is just as much as any government guided by its own interests. Nobody gets to stand outside society; nobody gets to escape dialectical materialism; nobody will ever do the right thing just because it's the right thing to do.

What is to be done then? No one cannot stand outside society, so we always have to work within society. Hence the original communist ideal that the workers act as a class within society for their own interests against the interests of the capitalist class. A communist party, a communist intelligentsia, cannot therefore not substitute for the working class, or try to act directly in the interests of the working class. A communist intelligentsia must subordinate itself to the working class, in much the same sense that the present-day academic intelligentsia subordinates itself to the capitalist ruling class (or the upper levels of the professional-managerial class, which periodically struggles — sometimes successfully — directly with the capitalist class).

The problem — as yet unsolved, and perhaps unsolvable — is how to get the working class and the masses of humanity to want to take power.

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