In the light of corona – Part 15: A Fairytale of money and economic growth

Once upon a time there was a village sweet,
And on its streets did a shoeless baker and a hungry shoemaker meet.
But try as they might, they had to lament,
There seemed to be no end to the predicament:
For how many buns is enough for a shoe,
And is a pair of booths worth a loaf or two?

One day a peddler was seen riding down the street,
With coins clinking in his pockets, he all vendors did greet.
Gave one for a bun, and got himself three,
Boots were paid with coins, not given out for free.
With coins as currency the problems were solved,
In exchange for shoes and loafs, the coins were involved.

No longer went hungry the shoemaker’s sons,
As with each sold pair of boots they got out to get buns.
And the fancier the shoes did the bakers daughter want,
The more did the baker heat the oven for croissant. 
A happy ever after, if there ever was one,
The fairytale of money was thus once and for all spun. 

This fairytale is exactly that, a piece of fiction. The story it tells about how money came into being is as familiar as it is false: money was not developed to facilitate barter and exchange. Instead, money was developed to enable credit and debt. 

The origins of money

In his opinionated book “Debt – the first 5000 years”, Graeber draws from anthropology to painstakingly trace and map the history of money. The traditional narrative of the development of money, prominently featuring in the teachings of Adam Smith and subsequently taken as the corner stone of western economy, paints a sequence of developments starting from barter to the introduction of money, to credit and to debt. However, contemporary anthropological evidence points to a completely reverse order.

In native tribes or amongst the earlier civilizations, the ‘economic’ exchanges were based on knowing and trusting the people. If you had a good crop, it made sense to feed the neighbors, because the year your crop failed, you could trust that they fed you instead. This is a radical thought as it builds on a very different basic understanding of the nature of man than the ruling notions of economic theories have for the past centuries been proposing: instead of selfishness and greed, trust is the underpinning force of all economic exchange. As showcased in the recent juxtaposition of the fictional “Lord of the Flies” by Golding, and the actual events unfolding in a real life case of teenagers being stranded on an island, while we humans definitely feature greed and selfishness, they are not the only, nor even the strongest motivator of all our actions. 

In small societies where everyone knew each other, and even in more complex coalities, such as the medieval Maghribi traders in the Mediterranean region, trust was the lubricant that enabled economic transactions. There was no need for a medium of exchange, currency, when the collective sense of fairness underpinned the exchanges between people who knew each other. 

The earliest recordings of money actually depict a different setting. For example, in ancient Egypt, the builders of the pyramids labored against wages (yes, they were not slaves, as again recent findings show us). The officials of the pharaoh noted down how much they owed each man for his toils: numbers and money were necessary to keep a record of the debts. Money was introduced as the means to enable debt – and credit. 

The impact of credit

The pyramids would not have been built had there not been a notion of credit. The builders gave credit to the pharaoh in the form of their labor, trusting that the investment of their sweat would be worth their while in the future when the debts were paid. They could have labored on their own crops and cattle, taking care of the immediate needs of shelter and sustenance, but they believed that instead making an investment of their efforts, they would be better off in the future than they would be if they only kept on meeting the daily needs. 

This faith in the better future is still the underlying raison d’être of investments, credit, debt – and subsequently the driving force of economic growth. We always have a choice: do we orient our efforts (and money) towards fulfilling our imminent needs, or do we believe that putting in effort (or money) that yields no immediate rewards, makes those rewards materialize manifold in the future? There is always uncertainty when choosing to wait for the future rewards. If I eat the potato in my hand right now I can be sure that I get to eat it, but if instead I plant it, there is a risk of draught or pestilence resulting in me losing the potato altogether. Therefore, it must be appealing enough to take that risk: if the one potato would when planted only gain me the same one potato, I’ve risked losing it for no gain but prolonged hunger – but if the potato becomes five potatoes, the risk is worth taking. 

Investments and credit follow the very same logic, and from that ensues the need of economic growth. In other words, if we didn’t believe in a better tomorrow, it would make no sense to put any effort into something beyond what can be realized immediately. And if we as humanity had never put in any effort to create things beyond what is needed for today’s survival, we would still be roaming the lands to hunt and gather. 

The fundamental problem of economic growth

Thinking about the pursuit of economic growth this way indeed seems to make it the iron law that we are constantly bombarded with. Putting a stop in the pursuit of economic growth would be equal to confessing that we don’t believe that tomorrow could be better than today. There is no gain in waiting or investing money or effort, as the future will not be more abundant as today, only more uncertain. This is the underlying point in the arguments that keep painting economic growth as critically vital, a natural law like rule the whole of humanity should abide by. 

However, there is a catch. This catch pertains to the nature of money, and the way our perceptions of it have become twisted. Money is fundamentally a means to denote the value of things of value – money itself has absolutely no value. At some point in human history (some pinpoint Renaissance, some the later decoupling of financial and real economy) money took on a life of its own. It began to be seen as having inherent value, not only as a means to denoting the value of entities of genuine value. Of course, the power of money builds on the difficulty of assessing other types of values, as we humans are notoriously good in disagreeing what we perceive as valuable: I may treasure the sentiments I experience in an opera performance, whereas you might prefer listening to cats yowling before being dragged into one. 

But the problem is this. If our faith in a better tomorrow translates to a tomorrow with more money (as it is the only yardstick we use to denote value), that means that all of our actions are today geared towards increasing the amount of money there is tomorrow. That means that everything else becomes a means to create more money. There is no inherent value in experiences, but providing them is a means to procure money. There is no inherent value in food, but producing it is a means to make profit. There is no inherent value in arts, but the ones being able to use them to make money are validated. There is no inherent value in nature, as it is only a resource to be used in making more money. There is no inherent value in relationships, in happiness, in individual well-being, in knowledge, in understanding, unless they are harnessed by entities using them to increase the bottom line. A human has value only as a part of the production machine honed to make money or as a consumer to squeeze out money from.

Corona disruption and the (very) weak signals of hope for a better tomorrow

The good news is that we do not need to stop believing in a better future. The humanity can march on and pour in effort today to bear juicier fruit tomorrow. The bad news is that as long as tomorrow’s fruit is perceived and denoted only as money, we are doomed to meet the very real limits of the resources we can rip out of our globe to be transformed into money. The invention of money as a yardstick has had its notable benefits, but we are now facing the upper limit of those benefits.

We must start valuing things based on their meaning to us, their beneficial aspects to us as individuals or us as societies – not as things that can be made into money. This does not spell the end of business, firms or entrepreneurial spirit, but it does mean a change in the focus of activities: the emphasis must be on what is the genuine value this firm creates to individuals and society, i.e. how does it make the world a better place – not on how can these perceived customer values be transformed into profits.

Interestingly, this corona disruption has highlighted that we still have that ability embedded in us. We can still cherish things beyond their monetary value. Surveys of the behavioral changes in the time of corona lockdown highlight this. Instead of slumping down on a couch to provide Netflix more revenues, we have gone out for walks, taken time to go on a leisurely stroll in the parks and forests – reacquainted ourselves with the nature we in Finland still have abundantly. Instead of online shopping plastic-wrapped industrial bread, we have made an effort to learn baking bread and buns to enjoy both the act of baking and the joy of eating self-made bread hot from the oven. Instead of immersing ourselves fully into the realms of virtual games and social media, we have been petting and getting dogs, cats – and in some cases even horses. 

As I’ve written before, a disruption is a trigger that makes change mandatory, but it is only our responses that shape the direction of those changes. As said, we are now living a watershed moment. Will we see a future where the faith in a better future is symbolized by getting a peeing puppy to gain a friend for years, by painstakingly starting to learn the art of baking traditional rye bread to have a future for perfecting it, by putting aside our career ambitions to focus on our (sometimes tiresome) children for them to grow into balanced and happy individuals, or by going out of our way to help preserve our local forest for the future generations to enjoy?

Can we still see through the blindfold of money to value and cherish all the riches of our existence that we genuinely are surrounded by? If so, maybe we still have a chance for living happily ever-after.

The End.

Milla

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