Monday, July 2, 2012

David Graeber and Geoffery Ingham - how they combine to challenge my thinking!


The idea that money is a social relation as described by Ingham points to the importance of exploring what Ingham has called the "nature of money" and its production. As a political economist I am deeply interested in what the creation of money means for the entire operation of a given political economy. Who controls its creation? What quantity is produced? Is it created by one centralized authority? By a multitude of entities? And, most importantly how do we construct the "money of account"? What political economic configurations enable the construction of a given "money of account" and how might that "money of account" come to be threatened, weakened or challenged?

With this in mind I am deeply curious about what the rise of new technology means for the future of money and how this might impact the nature of money and its production. Several anthropologists have made the claim that history has been marked by different periods of money - virtual verse commodity based money. These anthropologists, including David Graeber, claim that these different forms of money are tied in some way to different political economies/ social relations. If this claim is true then the period that humanity is entering into in which our experience - as everyday citizens - is increasingly mediated through forms of virtual money heralds a shift in the political economy.

The combination of these two claims - that money is a product of a specific set of social relations and is always the result of political compromise and that virtual money is associated with specific and in many cases non-capitalist social relations - can be combined to explore a unique set of developments in today's political economy.

The first is the rise of mobile technology and the associated rise of mobile banking (or e-money, m-payments, m-transfers and more) which are increasingly resulting in the virtualization of our monetary experiences. Though it is true that 98% of money is already virtual - meaning we only print and mint about 2% of our money supply - up until fairly recent, almost all day-to-day economic exchanges have been mediated in some way by cash (or checks) giving money a sense of realness and tangibility and real scarcity. The shift away from cash based transactions has been occuring in the developed world for the past couple decades with the rise of credit and debit cards (though in America upwards of 35% of all economic exchanges are still carried out using cash). While, in the developing world the change is much more rapid due to the rise of mobile technology which is leading to an almost instant virtualization of money (in some cases some people have only ever experienced money as a virtual thing).

The second important trend is the personalization of the idea of money creation. Increasingly, there are claims, efforts and philosophical arguments being made that state that individuals can and should make their own money. This is a unique claim one that, as far as my research has found, has not been made before. There have been claims that local communities or individual institutions (such as banks) can create their own money but never have individuals claimed that they, themselves, can create money.

The combination of these two historically specific developments deserves further exploration in light of the recent work of both Ingham and Greaber. The importance is emphasized by the ongoing crisis in our financial system and the need to understand the true nature of money - its production and the way in which this production impacts the political economic options and possibilities. 

All of this points to the very important question of how we produce money and the failings of most theory to fully understand the importance of the money of account (despite Keynes best effort to highlight its importance). The challenge is to break away from the historical mistake made in most theoretical explorations of money - that is the obsession with the "form" of money - and to rather fully understand the production of a viable 'unit of account". What political economic configurations are needed? Does a shift from commodity to virtual money have any significance?

The challenge in all of this is that, given my personal belief that the form of money is not of importance but rather the unit/money of account is the most critical and hardest to understand - why then does the virtualization of money have any real importance? My claim is that this virtualization of money is leading to new experiences of money that are raising deeper questions about the production of money - if money is not something that is naturally scarce (i.e because it is gold or silver or cows) then why is it scarce? Why are there not sufficient supplies of money? And, if there are not sufficient supplies of money, and money is not a unique object then why can't I just produce my  own money? Or why can't my community just produce its own money to meet its needs? 

All of these questions will result in deeper questions - questions that highlight the current systems of power, of class and more comprehensively of the existing social relations. These questions may yet lead to deeper revolutionary thoughts that may enable a disruption of the given political economy.

If, as I believe, these shifts are part of a pre-revolutionary change - the better we understand the political economy of money production as it relates to the questions of the social the better prepared we will be for developing viable alternatives which are more closely aligned with idea of economic democracy.

6 comments:

michael pulsford said...

Have you read the whole of Graeber's book 'Debt'? There's a lot in it that bears on your current thinking, and he argues that we've alternated between broad historical periods (around 500 years each) where money was virtual credit and periods where it was backed by something material like gold or silver.

Unless I'm misreading you (and apologies if so), I get the sense you're positing our current swing towards virtual currency as a new thing, perhaps without precedents. But Graeber presents a lot of evidence to suggest otherwise, and reads this shift as a profound social change, sure, but a change that's happened many times in human history.

It's a great book, anyway, and well worth a read.

Saul said...

Hi Michael...yes I have read the whole of David's book. His conversation on virtual verse commodity money is something I have thought about deeply over the past several years even prior to reading his book.

Unfortunately, I have not conveyed my self clearly enough. I am not positing this current swing to the virtual as new - rather I am positing the swing towards individual credit or the idea of being able to make your own money/credit as something new.

And, I am positing, that the current swing (based on the precedents highlighted by David) as representing a potentially fundamental shift in our social relations and am using Geoffery Ingham's ideas of the production of money to support that.

Thanks for your comments!

Tamir said...

Just tried commenting at length, but my comment disappeared. Trying again more concisely (which is probably a good thing anyway): interested in knowing what your poverty work re currency creation consists in. I work for a NYC construction union which is trying to find ways to “reorganize” its current membership to make them more active both in the union, and in helping one another in these bad economic times. The notion that we have become so pathologically addicted to cash as a means of engineering ourselves around collective action problems has singularly obsessed me the past 18 months or so. The troubling fact is that traditional money is really good, in a particular (often pernicious) kind of way, in overcoming the prisoner’s dilemma. I am thinking, for example, of the in pin factory in the Wealth of Nations as a paradigmatic example of how, viewed from 10,000 feet, money is just a great tool in getting people to combine their efforts to achieve more than they could individually. But its success in this regard seems to be at the expense (among other things) of just about all other means of achieving collective action (one problematic other current collective action success story perhaps being religion). Not until a week after reading your post did it occur to me that perhaps we ought to be coming up with an alternate currency informed by our own communities’ values. For example, perhaps my union needs to be assigning some form of frequent-flyer-like union-service points to members based on their activities on behalf of the union or on behalf of one another, which could then be redeemable through services by other union members on their behalf, or by accessing union bulk-rate-negotiated outside-services like financial planning, legal assistance, child-care, supplemental health benefits, etc..

Anyway, getting back to my first question. Does your poverty work have anything to do with things like this.

Thanks again for your thoughts.
i

Tamir said...

Just tried commenting at length, but my comment disappeared. Trying again more concisely (which is probably a good thing anyway): interested in knowing what your poverty work re currency creation consists in. I work for a NYC construction union which is trying to find ways to “reorganize” its current membership to make them more active both in the union, and in helping one another in these bad economic times. The notion that we have become so pathologically addicted to cash as a means of engineering ourselves around collective action problems has singularly obsessed me the past 18 months or so. The troubling fact is that traditional money is really good, in a particular (often pernicious) kind of way, in overcoming the prisoner’s dilemma. I am thinking, for example, of the in pin factory in the Wealth of Nations as a paradigmatic example of how, viewed from 10,000 feet, money is just a great tool in getting people to combine their efforts to achieve more than they could individually. But its success in this regard seems to be at the expense (among other things) of just about all other means of achieving collective action (one problematic other current collective action success story perhaps being religion). Not until a week after reading your post did it occur to me that perhaps we ought to be coming up with an alternate currency informed by our own communities’ values. For example, perhaps my union needs to be assigning some form of frequent-flyer-like union-service points to members based on their activities on behalf of the union or on behalf of one another, which could then be redeemable through services by other union members on their behalf, or by accessing union bulk-rate-negotiated outside-services like financial planning, legal assistance, child-care, supplemental health benefits, etc..

Anyway, getting back to my first question. Does your poverty work have anything to do with things like this.

Thanks again for your thoughts.

Saul said...

Hey Tamir,

I started my research into monetary theories from the perspective of economic development. I was always confused by why there was a lack of financial resources in certain places (actual geographies or communities). This led me to explore deeper the origins and ways in which money is created.

I agree with you that money can be viewed as a useful "tool". However, a more nuanced way of viewing it is that money is an actual reflection of our social relations - the production of money is always a political project and its scarcity is always the result of political economic configurations.

This said - I do believe there is potential in communities creating their own supplies of money. However, the trickiest part - and this is the part I certainly do not fully understand yet - is how do you create (be it a community, a country, etc.) a money of account (say the $ or the GBP) that is controlled and retains value outside of existing social relations.

Basically what I am saying is that it is really, really hard to create money that has its own unit of account and that you can have power over its value.

The jury is still out I think on whether approaches like you suggest, have long term impact. However, there is no doubt that in the short term these sorts of approaches can really help keep a local economy going and (as the efforts during the Great Depression in Europe and America showed) even help it grow.

Those "frequent-flyer union points" will only be useful if they can either a) be converted directly into the dominant money (US $) or b) exchanged directly for valuable goods or services.

Tamir said...

Do you have any reading suggestions on small scale applications of some sort of community currency type thing? I downloaded the most recent Tom Greco book based on the reference to him in your bio (very interesting so far).

I have read the David Graeber book on the history of debt, but am otherwise not too familiar with anthropologically based accounts of money. Having said that, my first blush response to your two points is 1 -that we ought not be put off by the fact that a local currency necessarily reflects culturally informed values, so long as those values, in some unrepentedly normative sense, are better than those imbedded in the common currency (which shouldn't be too hard in light of the competition!) and 2 -- having some level of convertability back to the common currency doesn't bother me so long as the new point-system engenders some otherwise non-occurring collective action among members/service-point holders. It doesn't have to replace the common currency, it just has to create community benefiting action that wasn't otherwise happening.

Thanks again.