How Money Affects Morality - and How Morality Affects Money

The title of my post today reverses the title of an article in today's New York Times: "How Money Affects Morality," by Eduardo Porter.

Porter's NY Times article announces the results of a new  university study, carefully-planned and executed through experiments with hundreds of people. This study shows that even "the simple idea of money changes the way we think – weakening every other social bond," and therefore gives rise to general cultural deterioration and institutional corruption.

I'm sure the article is true. But the article is a little like talking about a rip in the upholstery when the car is headed at high speed towards a cliff. Two problems with the article's reasoning point to a much greater problem that faces us all today:

1. First, the author's unquestioned but fundamental assumption is that money "is" a given, unitary thing with a single essence. But, in the same way that fruit isn't always apples, the money we use today is not the only kind of money that has existed or could exist. So-called "money" has existed in many different forms and has many different histories, and will exist in new forms in the future. There isn't just one "money," the same everywhere and at all times, which must be the same in the future as it is today. There have been many different monetary systems, even within modern democratic and industrial civilizations, each of which has produced "money" in a different way, and in doing so has created a different relational structure between people -- that is, in each instance has had quite different "moral consequences" for individuals and for society as a whole. Different kinds of money have different moral effects. Bernard Lietaer is one among many economists who have emphasized this point.

Once we realize that money is a human artifact that can be differently constructed with different consequences, there opens up the possibility of thinking about money in a whole new way, and of entertaining different possibilities for what it might accomplish if we chose to make some changes.

Lots of people in lots of places, in fact, are carrying out such thinking and experimenting all over the world today -- it's an area of great interest and activity, beneath the radar of mainstream news and politics.

DIFFERENT MONETARY SYSTEMS HAVE DIFFERENT MORAL CONSEQUENCES

What the author of the NYT blog incorrectly assumes is that modern, privately-issued, debt-based money "is" money. He is blind to the fact that money can be and has been something quite different. He doesn't understand, for example, what makes our particular form of money "privately issued" or "debt based," because he doesn't get that other, different currency systems have existed -- so these distinguishing terms have no meaning for him.

(To give only the briefest example of some different monetary systems: First, of course, there is our present-day, debt-based monetary system, which is now used around the world and originated in monarchical Europe. But for a time America used some very different monetary systems, which  sprang up out of the much more democratic culture arising in the American colonies. These were still in operation during the time of the American Revolution (and some of the principles that led to them were revived for a time by Abraham Lincoln when he issued the Greenback to fund the American Civil War). However, over time these alternate money systems and their underlying principles were done away with and all but forgotten through a very interesting course of events and not a little manipulation by powerful interests. Because the ordinary population doesn't understand the monetary system, and because that system has been made to seem so complex that only professional economists could understand it, such powerful players have shaped our monetary system in ways that are detrimental to the population as a whole. It's this detrimental effect that the authors of the cited article and cited study are somewhat dimly bringing to awareness.  -- The story I've been tracing in this aside has most recently been told  by Stephen Zarlenga and Ellen Brown, independent of one another, in their books about money.)

2. As already implied above, a second and quite serious problem with the NYT article is that, in making the assumption that there is only one "money," the article serves to entrench our current monetary system, so in this sense the article serves the status quo and the moral decline that it complains of.  

ARCHITECTING NEW MONEY SYSTEMS: WHAT IS MONEY FOR?

A basic question the article fails to ask is, What is money "for"?  

In today's system, money has become primarily a vehicle for building the power of a small elite.  It's a vehicle for gathering up the labor energy of vast populations, and directing that energy to serve the leisure, fantasies, and egos of those privileged few who decide when to create money, whom to provide it to, and whom not to provide it to, and the terms of the deal.

Ideally and in concept, however, money is a vehicle to facilitate mutual exchange in large populations and/or across vast distances, so that large populations, collectively, can benefit from the many dimensions of "surplus value" that can be generated through mutual collaboration.

In a hypothetical world of isolated individuals, or of small isolated communities and their local resources, human effort can only achieve so much. But in modern times we have discovered that, through collaboration and specialization of work, we can produce much more, including large technologies, machineries and coordinating  institutions through which this surplus value can be invested for the purpose of achieving additional orders of surplus value.

THE MIRACLE OF COLLABORATION: PUBLIC VALUE

And this surplus value is by logic and by all rights public, belonging to the community as a whole, not to any individuals or subgroups. However, this a logic that remains little understood, and instead our civilization goes forward in allowing a very few to take what should belong to all.

To elaborate and explain a bit, let's say my private efforts and skills are worth x to me, and your private efforts are worth y to you.  However, when you and I begin to collaborate and exchange — for example, when each of us specializes, each doing one part of a "joint" work more efficiently than any one can do alone, and thereby giving rise to a new domain of "common work" — a new order of value is created (as well as a new order of shared existence, common and collective). This new value is partly reflected in time and energy saved, but also in new creative possibilities unleashed. And this new or surplus value can be called "public" because it comes out of the collaboration itself, i.e. out of the mutual coordination of multiple parties (whether by express agreement or simply going along, which is tacit agreement) and not from any of the individuals in isolation. Hence this value properly belongs to all parties in the collaboration.

It is fair that I should receive my x value — the private efforts I put in — and that you should receive your y value.  It is also fair that every I and you should receive an equal share of the public or collaboration value, which fairly belongs to all of us. And that we should reckon nature and natural resources as a common value. In today's unjust world, an individual is unlikely to receive even the "x" or "y" value of his or her efforts; the public value, and the natural resource value, is almost wholly being taken by a few. Public value today is being privatized, and largely through the vehicle of the monetary system.

(Side note: even my needs, for example the biology that demands food and shelter, are part of what gives a portion of value to your products; all human beings share certain common, fundamental needs -- hence this portion of the market value is also public, and includes this component of basic human needs, because they come from nature, and not from individual skill, learning, choice, will or effort. The need element in the market is a public value.)

INDIVIDUAL AND COMMUNITY HEALTH DEPENDS ON DISTINGUISHING THE PUBLIC FROM THE PRIVATE, SELF AND OTHER

If we were able, in our cultural understanding, accurately to distinguish between what portion value is truly assignable to private, individual effort, what portion to common nature, and what portion to collectively produced, i.e. public or collaborative "surplus," we would be in a position to reward individual merit as individual merit ought to be rewarded, and more importantly, to enable every individual to enjoy his or her "ownership share" in the (spiritual) "whole" of human collaboration.

If everyone shared only in only that portion of value whose production can in fact be assigned to no private individual(s) but comes solely out of the collaboration surplus and can only be assigned to the "community," the "system of relationships" and to nature (including earth, resources and those needs that are common to all persons), we would have a world without poverty and likely a world where love and beauty ruled the day.

Now I said "if" we were able to make these distinctions. Are we? Technically, I the answer is yes. Making a full cost accounting like this would not be all that difficult.

One of the key places that this value resides is in land. Land value isn't the entire answer, but it is probably the main answer. That's because the "public value" that I'm talking about, that portion of dollars in the economy that are attributable to no individuals, but only to the surplus value created by community and collaboration, is reflected in the market price of land. (This extends to all nature actually, including natural resources which only have "market value" to the extent that a public demand is developed for them, which demand itself grows from the engine of collaboration, and also includes things like the airwaves and internet bandwidth and public writing).

The value of land, and of access to market communications, are functions of the value of human collaboration, i.e. the public value I identified above.  The great insight was probably first made and elaborated by the great Henry George.

What makes a piece of land worth a certain price? -- by the value of land here, we mean the land itself, not any "improvements," such as buildings and infrastructure, that might be made upon it. (In standard property tax bills, this distinction is already made and accounted for between value of sheer land (nature) and "improvements" added by the efforts of individuals.) What makes the value of the sheer land worth a certain amount? Certainly not the individual, private efforts of any person. Consider a plot of land in a major urban city: the land is just there, unchanging, yet its value generally increases! As often in fact happens, an individual might buy a plot and do absolutely nothing with regard to it, yet its value still skyrockets and goes into his pockets!

As this example makes obvious, what gives value to the land is the health and collaborative/economic capacity of the community that is located near that land. As some economists say: the price of land and housing is a function of the jobs in the community.  If there is a lot of high-paying work available, the price of land goes up. Which means if the location is a hot-bed of collaboration fueled by the public infrastructures of roads, markets, common individual needs, communications and relationships, the value goes up. This is a community-produced value.

My main point with this aside into the value of land has been to suggest that, yes, the distinction between individually-created and publicly-created wealth can be measured, although we don't pay attention to it and that is part of our dysfunction and why we don't have the tools to figure out how to relate our individual selves to our communal selves (and so we have very superficial and heated arguments that pit individualistic capitalist ideology against communitarian socialist ideology).

To distinguish between what is properly individual and what is properly collective is key. Our current systems have largely been constructed on individualist logic, in part because the "scientific" turn of earlier generations towards the concrete and away from the religious and spiritual sent thinkers into refuge towards "hard individual facts" and away from seemingly "spiritual" things like community love and togetherness and relationships.  But relationships are no more or less spiritual than individuals. And if we design money only to serve individuals without remembering the collective component, we create a system that ultimately leads to disaster for individuals and the collective: morality deteriorates, corruption spreads.

The monetary system is part and parcel of the private property system and our political/governance  system -- land is a container, people are the agents, nature provides the resources, and governance provides the vehicle for coordinating and channeling all human energy towards collective benefit. Viewed in this way, the monetary system (together with taxation) is a part of governance -- this is why, in the U.S. Constitution, the power to issue money is named as a core power of government. This power was delegated to private banks with the institution of the Federal Reserve in 1913.

PERSONAL & COLLECTIVE GROWTH:  HEALTHIER, HAPPIER INDIVIDUALS AND COMMUNITIES  

The core logic I am attempting to bring forth here is something like the logic that appeared with the innovation of employee stock ownership plans -- these plans operate on the reasoning that, when everyone has a stake in the health of the whole, there is a moral and energetic benefit to all individuals and to the whole as well. (Of course, our current ESOPs of course exist only within individual firms, which themselves exist within a larger competitive context where there is no such recognition, economically speaking, of a collective ownership in the whole.)

The logic I'm trying to bring forth is also something like the logic that has emerged out of a
powerful strain of psychological thought and practive: that is, individual psychic health and the health of relationships in couples and groups of any size, is highly a function of the degree to which individuals are capable of distinguishing the difference between what they are "individually" or privately responsible for, and where relational matters depend on mutual coordination. Autonomy and intimacy, or autonomy and collective/relational strength, paradoxically grow together with one
another.

One of the key features of classical economics was the assumption that all economic logic was founded on the rational behavior of individuals and individual organizations. With the understanding that different orders of logic operate on different "higher" levels (an understanding that Keynes was one of the first to begin to bring into mainstream economics, in a partial way), our thinking about economics will change and we will begin to see more clearly the essential connection between the economic and the political, and indeed, the primacy of the political, which means not that government is more important than business, but that how we structure the human conversation, and ensure that all voices human and natural are heard and respected, is the most critical question and task facing us today: the assumption must be that the whole comes first, the collective comes first; "we" and the health of the we, ultimately decides every I.