No subject

is simply one way of managing the distribution of goods and services
within a particular kind of human society. Modern economics textbooks
dodge this point by comparing money to only one other form of exchange -
simple barter, in which (let's say) a physician and a farmer have to
negotiate how many bushels of wheat are worth a cure for an illness - and
insisting on that basis that money is inevitable because the alternative
is so clumsy. Surely, though, this puts the cart before the horse. It's
only when exchanges have already become subject to a market system that
exchanges are conceptualized in such terms, and that presupposes that some
standard measure of abstract value - that is, money - already exists. It's
worth mentioning that such great civilizations as Egypt of the pharaohs
had farmers and physicians aplenty for tens of centuries before anybody
thought of money.

What sets money apart from other systems is not its convenience - quite
the contrary, as such alternatives as household production of goods and
services, or traditional economies of gift and customary exchange, are
quite a bit more convenient for most purposes, since the extra steps
imposed by the need to bring money into the situation can be done without.
Rather, money has three distinctive features relevant to the present
discussion. First, to the extent that it can replace other forms of
distribution and exchange, it draws all economic activity into its own
ambit. That can (and very often is) used for political control, but this
is a side effect. The principal effect of this property of money is to
turn a society into an economic monoculture.

This elimination of economic diversity has been discussed in previous
posts, but it deserves more attention than I've given it so far. Diversity
is the basis of stability in any ecosystem, human or otherwise; when a
significant proportion of goods and services are produced in the household
economy, for example, the vagaries of the market economy have a limited
influence on everyday life; that limitation goes away once goods once made
at home have to be purchased in the market with money. Thus it's no
accident that over the last four centuries, as the market has supplanted
the household economy and other patterns of production and distribution of
wealth, economic crises have become progressively more frequent, more
severe, and more widely felt. The effects of the Dutch tulip mania and the
South Sea bubble were restricted to a relatively small proportion of their
respective societies; this was hardly true of the Great Depression of the
1930s, and seems to be turning out even less true of the Great Recession
now under way.

The second distinctive feature of a money economy is that it makes it
harder, not easier, to value certain classes of goods. What E F Schumacher
called primary goods - goods produced directly by nature without human
intervention - are perhaps the best examples. Most traditional societies
around the world, it bears noticing, have no trouble whatever recognizing
the value of primary goods and finding ways to integrate that value into
their own systems of exchange. The salmon ceremonies of First Nations
along the northwest coast of North America are good cases in point.

These societies have a gift economy in which rank and social influence are
gained by giving away goods - a system that once provided a very efficient
means of distributing wealth of many kinds through their societies - and
they treat the arrival of the annual salmon runs in exactly the same
spirit, as a mighty gift from the Salmon People that must receive an
appropriate response. Anthropologists who treat these arrangements purely
under the heading of religion (or, less politely, superstition) are
missing one of their central points; they are, among other things, ways of
integrating relationships between human communities and the natural world
into the traditional economy, so that the value of the salmon harvest is
always weighed in decisions that might affect it, and traditional
practices that preserve salmon runs are given potent economic sanction.

Such arrangements are common - indeed, very nearly universal - in
moneyless economies. They can also be found in money economies; one of
these days I ought to devote a post to the elegant ways in which the
classical Greeks, who had money and weren't at all afraid to use it, set
up lively economic exchanges with their own fragile ecosystem. (Like the
salmon ceremonies, these are normally treated purely in terms of religion
or superstition, and their economic and ecological dimensions have thus
rarely been noticed.) Still, the more completely an economy becomes
subject to money, the more difficult it becomes to include primary goods
in economic calculations. The Salmon People are perfectly capable of
participating in a gift economy, one might say, but there's no way they
can cash a check - or, for that matter, write one.

The third distinctive feature of money is subtler, and very often
misunderstood. Unlike other systems of distributing goods and services,
money functions as a good in its own right, and the right to use it
functions as a service. To some extent this is a legacy of the time when
money was made of some culturally valued substance - wampum strings in
eastern Native North America, say, or gold and silver in medieval Europe -
but it opens the door to unexpected developments.

If money is treated as a good in its own right, and the use of money is
treated as a service in its own right, then instead of exchanging money
for ordinary goods and services and ordinary goods and services for money,
it becomes possible and profitable to exchange money for money. The entire
world of finance, from savings accounts and installment loans up through
the dizzying abstractions of today's derivative markets, unfolds from this
third property of money. When money plays a relatively minor role in a
society, this dimension is correspondingly small; as the volume and
pervasiveness of money expands, so does the scale and impact of the
arrangements by which money makes money; when money dominates a society,
so does the world of finance, and the amount of money being traded for
money can exceed by several orders of magnitude the amount of money being
traded for goods and services.

What makes this problematic is that the rules governing money are not the
same as those governing other goods and services. Unlike goods and
services that have their own value, money is only worth what it can buy;
unlike goods and services that must be produced by labor from resources,
money can be conjured from thin air by dozens of different kinds of
financial alchemy, or by the momentary whim of a government. Nor does the
amount of money in circulation have to have anything at all to do with the
amount of other goods and services available. All these differences mean
that the economy of money can very easily slip out of balance with the
economy of nonfinancial goods and services.

It's useful, in fact, to extend one of E F Schumacher's insights further
than he did, and speak of the economy of money as the tertiary economy of
the modern world. If the primary economy consists of the natural processes
that provide goods and services to human beings without human labor, and
the secondary economy consists of the conjunction of human labor and
natural goods that produces those goods and services nature itself doesn't
provide, the tertiary economy consists of the circulation of monetary
goods and financial services that, at least in theory, fosters the
distribution of the products of the secondary economy.

Last week's post pointed out that the secondary economy depends on the
primary economy. In the same sense, the tertiary economy depends on the
secondary economy - all the money in the world, it's fair to say, won't
allow you to buy a good or a service that the secondary economy doesn't
produce. Perhaps the greatest problem with contemporary economic thought
is that it inverts this relationship, treating the tertiary economy of
money as the prime mover, with the secondary and primary economies
dependent on the world of money. This odd and disastrous inversion, and
its implications in a world of rapidly depleting natural resources, will
be the theme of next week's post. _____

John Michael Greer has been active in the alternative spirituality
movement for more than 25 years, and is the author of a dozen books,
including The Druidry Handbook (2006) and The Long Descent (2008). He
lives in Ashland, Oregon.

http://thearchdruidreport.blogspot.com/2009/07/nature-wealth-and-money.html


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