The Problem with Money

Capitalism is the practice of using wealth to collect interest or rent. That means that those who possess capital can have an income not from their labor but from their property. It’s important to grasp that “real” productivity comes from work that provides a service or transforms materials into something humanly useful—whether the exertion comes from muscles or from machines, and whether the materials are physical or more intangible, such as concepts. Income from capital means more spending power, but not necessarily more productivity. In other words, your spending power can grow on its own, but only your labor can make real value. While capital can increase your share of total wealth, it cannot by itself increase the supply of goods in the world that have real value.

Some economists consider it a problem when global capital is not productive enough. Being super-rich already, its owners may not be motivated to use it as effectively as someone with less means. However, productive of what? Effective toward what end? In the face of ecological disaster, production that results in pollution, exhaustion of non-renewable resources, and global warming is not objectively desirable. Consumption that requires such production should be discouraged. Money sitting idle is at least money not being used to destroy the planet!

An individual is both producer and consumer, according to how their personal wealth and energy are disposed. The extremely rich have excessive spending power as consumers; yet, only so much personal consumption can be directly satisfying. (A person can only sleep in one bed at a time, drive one car, fly one plane, eat one meal, etc.) Spending power represents choice for the wealthy more than direct consumption. Of course, they may cause more environmental fallout in their quest to establish that range of choice (several houses around the world, several cars, private jets and boats, etc.) Yet, it could be telling to imagine the cumulative effect of the same total spending power if it was distributed over many poorer individuals, who might be more motivated to use their comparatively meager resources as capital to further increase their wealth. Would the redistribution result in more or less global warming? In other words, might the capital of a large middle class have a worse ecological effect than the same capital in the hands of a small super-rich elite? If so, would it not be ecologically better to maintain the unequal distribution? That is a big “if,” and I am not justifying inequality, which many perceive as the world’s foremost social problem. Rather, I want to point out that merely redistributing wealth in the name of fairness would not solve our global ecological challenges. Productivity and growth must be altogether redefined, in such a way that eliminates production detrimental to humanity’s long-term interests.

Laissez-faire means one can buy what one wants if it is available and produce what one wants in the hopes someone will buy it. But nature is no longer going to let us do just what we want. Government could intervene to limit production to certain “goods” that are indeed good (or less bad) for our human future. It could also limit what can be purchased, by specifying what credits can be used for. While libertarians would object to such impositions, they are free to embrace and advocate voluntary restraint. One could argue, under the circumstances, that one is morally obliged to do so, since the other side of freedom is responsibility. In effect, we turn to government to make us do what we know is necessary, but which we resist—in part because we fear others will not do their fair share. The job of government is to impose fairness along with order, like a parent who must deal with squabbling children.

The whole advantage of money is that it can be used for any purpose that others accept, regardless of who it belongs to or where or in what form it is stored. But, what if the dollar were not this anonymous and abstract unit of power, but could be used only for specified purposes—for example, for basic necessities or for “green” projects? This is entirely feasible in the digital economy. A unit of wealth could be spendable only on certain products or services, or used to finance only certain projects or activities. Each dollar (or euro or yen) would have its own earmarked identity, could only be used for its designated purpose, and would be a non-transferable credit. No doubt a black market would arise to get around such restriction. But that loophole effectively already exists, in the form of untaxed offshore accounts and other unfair advantages for the ultra-rich.

If total global wealth were distributed evenly, an individual typically might not have enough savings to finance an enterprise beyond a certain scale. And where wealth is distributed unevenly (as it almost always is), the vast majority will not have the needed resources—which is why they borrow from those who do. This is a fundamental unresolved problem of social organization. At every level of community, people have always needed to pool resources to get some things done. When a few control the lion’s share of resources, however, the temptation is to charge the community for their use. From the community’s point of view, this is a form of extortion. “Usury” was once forbidden by religions for good reason. We have gotten used to it, so that it seems normal and necessary, even if unfair. The result is a mounting burden of private and public debt, with crippling interest payments and skyrocketing rents and real estate prices.

If 70% of global wealth belongs to 10% of global population, then those wealthy individuals are 70% responsible for how the world’s resources are used. The fate of the planet lies proportionately in their hands. Quite apart from the question of redistribution, fairness dictates that the greatest pressure to reform should fall upon them through taxation and legislation. But rather than being an incentive to use capital more “efficiently,” these measures should be used to foster production that does not damage the biosphere. The rich could take the lead in setting an example concerning the sort of investment to make. Rather than simply reducing inequality of wealth, the focus should also be to reduce its environmental effects.

To reduce the environmental impact of production, manufactured products must be designed to last for generations. They must satisfy real needs. Public and private property must be thought of as a patrimony to be passed on generation to generation. Nothing must be produced for the sake of making money—that is, merely to establish or justify one’s slice of the economic pie. On the contrary, a basic living should be everyone’s right! An economy is a game with many players, in which each person’s share is decided and justified. Yet, the game is not only about the individual’s winnings in a contest with others. For, every society is a collective enterprise, in which something is achieved beyond the holdings of the individual. The human enterprise as a whole is far more cooperative than competitive.

Granted that we need some material stuff, it should at least be durable and of high quality. However, since the beginning of the industrial revolution, production has only indirectly been aimed at satisfying real human need. The immediate goal has been to increase the investor’s share of the economic pie: make more widgets to get more money. It was never to make lasting stuff; or stuff so excellent that it didn’t invite an improved version. Quite the contrary, it didn’t take long for manufacturers to discover built-in obsolescence. With the development of plastics, durability and quality for the most part went out the window. The real value of “goods” (that is, their ability to satisfy genuine human need) was displaced by their symbolic or token value (that is, as a pretext to make money). The irony is that the quality of available goods was lowered for the rich along with everyone else. Spending power is thereby diluted for everyone in terms of its ability to purchase things and services of real value. As always, in compensation, the ultra-rich have sustained a cadre of artisans who can still produce the quality they alone can now afford. Otherwise, what would they have to show for their wealth?

It is largely the production of material goods that results in the carbon footprint. To some extent, the modern economy is already being de-materialized by information technologies. But Man cannot live by information alone. Material goods remain the gold standard of economic value, because we remain physical beings with material needs. In some sense, de-materializing the economy inflates the unit of value and slows “real” growth. And that growth must slow down for the sake of the planet. Yet low growth has a counterintuitive consequence in addition to the obvious belt-tightening for all: it increases inequality. Low growth increases inequality because the rate of return on capital (possessed disproportionately by the rich) has always been higher than the rate of growth (produced by everyone collectively). This has mattered less in exceptional times of high growth, because there is then a surplus to benefit everyone (so-called trickle-down) even though the rich benefit more. But high growth rate is neither historically normal nor sustainable ecologically. We have to find a way of life that is both fair and minimal in its planetary impact.