Money

A Theory of Modern Society

Nico Stehr, Dustin Voss

• Publisher: Routledge
• Year: 2019
• eBook ISBN: 9781000691061
• Topic: Economics
• Subtopic: Monetary Policy
• Index: Economics

Since the publication of Georg Simmel's Philosophy of Money more than a century ago, social science has primarily considered money a medium of exchange. This new book treats money as a more inclusive social concept that has profoundly influenced the emergence of modern society. Money is also a moral and political category. It communicates prices and thus embodies innumerable evaluations and judgments of objects and services, of social relationships and associations.

At the same time, modern societies are undergoing fundamental transformations in which money assumes an ever-important role, while banking and financial services constitute the new primary sector of modern service economies. In this book, the authors trace the transformational scope of monetarization and financialization along the four classical productive forces—land, capital, labor, and knowledge—and evaluate the consequences of an irrepressible urge to quantify and monetarize almost everything social. What happens to a society in which the tangible products of the real economy lose their preeminent status, and everything is judged purely according to its economic value? The authors identify an increasing disconnect between market prices and social values with serious social, political, economic, and environmental consequences.

1
The Immaterial Economy

Semantic changes follow the structural changes at a considerable distance.

—Niklas Luhmann (1997: 1142)¹

At the heart of our inquiry is a systemic transformation of economic conduct and the conditions of economic relations that comes with the emergence of an internationalized and interdependent² economic structure³ increasingly devoted to the exchange of monetary and non-monetary symbolic “commodities” and services.⁴ Money and finance are now at the heart of capitalism and economic policies. The transformation of the industrial into an immaterial economy also implies a significant acceleration of economic activities.⁵

Following Niklas Luhmann’s observation about the time elapse between structural changes in society and their theoretical uptake, we agree that the socio-economic developments we are trying to capture under the heading of a social theory of modernity reflect social, political and cultural changes in modern societies that have been underway for some time and not necessarily only since the financial crisis during the early 21st century.

The observation that economic exchanges do not revolve around material products and their substantive value alone is not a historical novelty. It is no longer sufficient to convert a material resource into a material substance or product. It is crucial for the success of products and services to endow them with meaning (cf. Bourdieu, [1979] 1984), for example, aesthetic, moral, altruistic or sustainable attributes that make products desirable and valuable. Books, CDs, cars, furniture and so forth all aspire by their producers to have immaterial qualities that are not merely directly related to any functional improvement of the service or product. Material products can become hybrid commodities, for instance, cars, jet engines or ovens can generate and return data that in turn become the foundation for a business in the immaterial economy and that can be utilized and exploited independent of the location of their material substance.

It follows that businesses will attempt to differentiate themselves from their competitors based on the values of the company and their services and commodities, instead of just their products. Socially constructed immaterial/symbolic qualities, for example because other individuals value them, are not fixed desires or preferences (cf. Keynes, 1936: 156).⁶ And what may be of worth in one social context may be valueless or of small value in another age or society.

Our focus is the transformation of the economy into an primarily immaterial/symbolic/digital economy,⁷ an economy that is not linked to a specific location and has impacts reaching far beyond the boundaries of the economy and economics (that is, knowledge about the knowledge economy),⁸ that also affects for example policy prescriptions, changes in the nature of educational perspectives or the biography of individuals and families;⁹ in short, the immaterial economy is multifunctional.¹⁰ The impact of the financial crash of 2008 in North America and Europe may have been more political than economic although the monetary impact has enormous leading and amplifying to a persistent wave of cultural and political nationalism, protectionism and populism throughout most of the West (cf. Goodhart, 2017; Tooze, 2018: 20). In many countries a growing backlash against the political status quo is in evidence and perhaps only beginning. The backlash, in our view, represents a response to the broad sentiment of losing out in a giant zero-sum game. More than ever, the conviction that the winners appear to take it all is growing and supported by naked economic data about robust forms of social inequality in many societies.

The influence of the immaterial economy on the world of production and work is significant. Industrial production linked to a specific location does not cease but retains much of its economic importance. The socially necessary labor to produce things continues to decline. Instead of making new things, the working population much more often incrementally enhances the value of material and immaterial products and frequently is paid to serve others.

A concomitant manifestation of the immaterial economy is a shift in the rate of investment toward intangible assets or the digital infrastructure/platforms of the immaterial economy (R&D, information and knowledge, software, brands, and other resources) compared to investments in tangible assets. Inventions and innovations in firms are to a large extent fueled by investments in intangible capital in order to generate additional intangible assets (for example, computer designed services, management consulting services, marketing campaigns, online platforms, apps, advertising campaigns) and novel tangible commodities.¹¹ The trend toward investments in intangible assets is supported by the trends in financialization such as the emphasis on shareholder value that depress physical investment (cf. Davis, 2017: 1352).

A further significant development of the immaterial economy that can at least be observed until this day is the rapid and extensive concentration of intangible business activities in the hands of but a few corporations or even super-corporations, including software companies, airlines, banks, pharmaceuticals, car rental, credit rating, and many more economic activities, in fact, in some instances amounting to the global control of activities by just one or two corporations.¹² The winner-takes-all future scenarios are not scarce (Haskel and Westlake, 2017: 68). Apple and Google now control and provide a combined 99% of the software on which smartphones are run.

A representative example of applicable corporations would include U.S. companies such Starbucks, Google, Amazon, Facebook, Microsoft, and Apple. We emphasize the possibly temporary market dominance of corporations even though they are not very old—Apple was founded 21 years ago—but have ascended to dominance quickly because there is, of course, the distinct possibility that countries and multinational bodies rein into the degree to which they are able to operate without subject to severe state regulations.¹³ For the time being, a profound shift toward a concentration of now massive corporate profits among the super-companies can be observed. In the United States, in 1975, “109 companies collected half of the profits produced by all publicly traded companies. Today, those winnings are captured by just 30 companies” (Phillips, 2018).

Given the rapid growth of corporations that depend on few tangible investments, there is no need for sophisticated laboratories or experimental settings. It is reasonable to assume that their success rests on their ability to develop and control intangible assets. Given the lack of tangible investment for the creation of innovative services, the tendency toward monopolization and winner-take-it-all dynamics finds its counterpart in easy access to markets. This process is exemplified by the “app economy” (cf. Guellec and Paunov, 2017).

As is well known, an important aspect of this developmental pattern of the modern economy is the almost revolutionary expansion in the scale and rate of the growth of international financial transactions. At the same time, with the rise of the intangible economy, there is a need to rethink the limits of growth as well as the relation between nature (the environment) and the economy.

The boundaries between the social system of the economy and other social systems in modern society have become increasingly porous, if not eroded, and easier to cross, and so have the cognitive boundaries between economics and the other social sciences. Real changes and cognitive changes act on society as a whole. These changes will not be neglected in our analysis.

The transformation we investigate represents a significant change of the economic structure of both, industrial economies and modern societies that are assumed to have a knowledge-based economy.¹⁴ A knowledge-based economy is, of course, an economy characterized by the fact that knowledge (and information)¹⁵

has become the main productive force; that as a consequence, the products of social activity are no longer chiefly crystallized labour but crystallized knowledge; and that the exchange value of commodities, material or otherwise, is no longer determined in the last instance by the quantity of general social labour they contain but mainly by their content in terms of general information, knowledge and intelligence.

(Gorz, [2003] 2010: 34–35)¹⁶

From our more skeptical as well as more realistic point of view, we deem that André Gorz’s definition¹⁷ of the foundation of a modern knowledge economy, shared by many other observers, is far too knowledge-centered.¹⁸

Knowledge-centeredness means that knowledge as such and its core components, for example, its methodological (knowledge) apparatus is assigned a much too powerful direct and immediately productive and efficient role.¹⁹ Knowledge alone does not generate a profit or score goals. Knowledge is all too often portrayed as a set of ideas, coded instructions and/or methods that will somehow, for example, allow for the immediate exploitation of a given technology; or, as another erroneous implicit assertion has it, knowledge will diffuse almost on its own. Knowledge obviously “has to be transmitted and received, and there are barriers at both ends” (Stiglitz and Greenwald, 2014: 74).²⁰

Our cautious reaction is also seen in response to the emphasis on information or information technology as the defining factor of the modern economy. Although this is a rather common assertion, more information is not more knowledge.²¹ The theorist of the network society,²² Manuel Castells ([1996] 2000: 219), emphasizes for example that the decisive difference “between the economic structures of the first half and of the second half of the twentieth century [industrial and post-industrial economy] is the revolution in information technology, and its diffusion in all spheres of social and economic activity.” Manuel Castells’ (2000: 10) theoretical perspective, its singular focus on “what is new in our age is a new set of information technologies,” can be properly criticized as an idea based to the history of technocratic ideas (cf. Stehr, 2000). The conception of information or knowledge in such an abbreviated manner easily results in a triumph of instrumental reason.

Knowledge is not a production factor that can simply be assimilated into a chain with the traditional production factors land, labor and capital. This also applies to information. Knowledge lacks a number of the characteristics of traditional production factors: for example, it is not necessarily scarce; it does not disappear or is destroyed as one „consumes“ it;²³ the use of knowledge does not exclude its use by other actors; it is difficult, as we shall show in detail, to attribute the costs and returns of knowledge to individual producers of knowledge; the expansion of our knowledge is often linked to non-economic motives and, as we have indicated, knowledge has no direct instrumental qualities (see also Vazquez and Gonzalez, 2016: 147–148).²⁴

Our knowledge about the knowledge-based economy is precarious and limited. The same deficit applies to ways of quantifying the outstanding characteristics of the knowledge-based economy on the level of both national economies and individual corporations (cf. van Eekelen, 2015), for example knowledge-adjusted GDP (see McCulla, Holden and Smith, 2013) or new corporate accounting standards that would be needed for a knowledge-based economy.²⁵ There is no economic theory that accounts for exactly what benefits accrue from the investment in and utilization of knowledge in the corporate world (cf. Forey, 2004). Moreover, Gorz and other observers of the knowledge-based economy fail to critically raise, let alone arrive at robust results on, the issue of how such knowledge-based commodities and services come to be priced/valued in market transactions. We will appraise the economic value of knowledge in a separate chapter.

It would appear that at least on the surface, the concept of immaterial economy, as it will be explicated here, competes wit...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of Illustrations
• Preface
• Introduction
• 1 The Immaterial Economy
• 2 The Price of Land
• 3 The Price of Capital
• 4 The Price of Labor
• 5 The Price of Knowledge
• Conclusions
• Index