INTRODUCTION
‘Money, get away
Get a good job with good pay and you're okay
Money, it's a gas
Grab that cash with both hands and make a stash'
Roger Waters, Pink Floyd, ‘Money’
To consider the future of banking, in whatever form, we need to think also about the future of money and that in turn needs us to think about what actually is ‘money’. We already think we know the answer to that question.
We're obsessed with money. Admittedly, there are some who view the topic as a necessary evil, but ‘necessary’ it certainly is. Its pursuit dominates a large part of our lives in that concept we call ‘work’. Beyond that alone, money provides a mechanism for escaping from work through the funding of leisure or, ultimately, retirement. The process by which we normally gain access to money is that of banking and because of this the topics of money and banking are irretrievably interlocked.
But money is much more than it seems at face value. For most, it represents coins in pockets, notes in wallets and numbers on bank statements. We think of it as the reward for labour and effort extended and as a medium of exchange to be passed on to another party in return for a service or product. Entire disciplines – such as economics – have been created on the strength of it and even these attempt to take the subject to higher levels through more granular subsets such as macro- and microeconomics. Our understanding of money seems almost commonsensical, intuitive and understandable but there is one fatal flaw, which is that our understanding is incorrect.
In his book, Money, the Unauthorised Biography,3 Felix Martin takes us through the history of money and concludes that it represents no more than a set of ‘tokens’, themselves representing a system of credit and clearing, all ultimately based on trust. The management of these tokens has been reinforced through what he describes as three key quasi-technological breakthroughs:
- Mankind's ability to be numerate
- The capability to write and therefore to record
- The concept of accountancy, which has allowed both individuals and groups to keep records efficiently in a standardised way, permitting quantities to be tracked
The tokens themselves are a reflection of something deeper, that of universal economic value, which through standardisation has allowed trade to happen throughout the ages. The idea of ‘universality’ isn't confined to the topic of money but is considered to be a reflection of a spirit of a particular era, especially that of the golden age of Greece, which overall allowed humanity to take a more objective and measured view of itself. The evolution of money therefore is argued as being seen to be one more piece of evidence of a ‘fundamental intellectual revolution’ that was taking place at that time.
Other writers such as Nigel Dodd suggest in The Social Life of Money4 that there are other origins of money and that it ‘must have started somewhere’, but he distinguishes between the origins of monetary forms (such as coinage, for example) and the history of money in general terms.
Dodd suggests that there may well have been multiple origins:
- As a form of barter exchange system
- As a ‘tribute’, such as a form of payment (alongside various debts and fines) to religious and political authorities
- As a method of quantification, where we use the concept of money to quantify ‘value’
- As ‘mana’ or gifting, which in turn relates to the social interaction between giver and receiver, and the importance of money in the nature of social relationships
- As a form of universal language, where money is compared to a ‘system of signs’. Karl Marx described money as ‘the language of commodities’.5
- As a stimulant for violent or conflicting behaviour, not only in respect to power, politics and war (where money seems to sit hand in glove with these concepts) but also in the perceived conflict between employer and employee, buyer versus seller and creditor versus debtor
As we think about the continued evolution of money and banking, it's important also to position it in the context of further technological breakthroughs and intellectual revolutions. How will the concept of money change in an era of AI? The Greeks had already established the notion of economic value and that the economy could be considered as an objective space rather than a hypothetical notion, but there was still a practical need to organise money in such a way that prices could be agreed, credit and debt accumulated, and balances of payment reconciled. This could be done through mutual credit networks or the issuing of local currencies, but there was the continued risk of these localised arrangements defaulting.
With the sovereign or state being by far the largest transactor of money, it became increasingly popular to link the management of money to the sovereign or state itself. This doesn't suggest that the sovereign or state itself is beyond defaulting – as happened in Greece, for example, in 2008 – but it creates a higher degree of stability even if this is at a cost of forging a political link between money and power. This political linkage can, however, be subject to exploitation and manipulation. By medieval times, sovereigns had recognised this connection as a way of raising money from the populace through manipulation of the monetary standard, a process known as seigniorage. Coins were by then being minted without any written indication of their nominal value, only with the face or arms of the issuing party, so it was easy for the sovereign to reduce the ‘tariffed amount’ of the coin, and in doing so in effect create a one-off wealth tax. This approach – together with debasement, which was, in effect, a process of reducing the precious metal content of a coin to reduce its tangible value – continually served to erode trust in ‘money’ itself. Even today we are sometimes unsure about what it actually is, and this is likely to get worse as increased digitalisation affects us in all areas of life....
