The following essays are about wars, revolutions, social breakdown, the clash of cultures, socialism, delusional behaviour, technology, the arts, history, sociology and many other topics—each viewed through the prism of money. They illustrate how money is interwoven with almost every aspect of our lives. Money, like marriage, is a social institution but also an intensely personal matter. People tend to have strong attitudes towards it. Parents pass on certain attitudes, values and ways of managing money to their children. At the personal level, money forms one dimension of everybody’s lives. As a social institution, it is often contentious. The arrangements that societies have made to regulate money have varied widely. At least over the past 100 years, such arrangements have seldom stayed settled for long. Diverse philosophies of money have been influential in many of the great conflicts, key historical developments and turning points of the twentieth and early twenty-first centuries. In many ways, they have helped to shape the modern world.
Understanding money’s power as well as its limitations is especially important now. This is because people are linked together through complex monetary and technological networks. We live in a global money ‘space’. Increasingly, we also share a common global outlook (see below for definitions of these terms). The global takeover by this outlook is among the most significant developments of the past 120 years. We are staking the future of our societies on an assumption that its benefits far outweigh its disadvantages. We had better be right, for this is a high-risk strategy.
The Power of Money Illustrated
Historical instances and episodes illustrate the power of money from 1900 to the present. They show, for example:
- The remarkable influence of a few German thinkers not only in shaping the twentieth century’s ideas about money but also on what actually happened—on history—despite Germany losing two wars;
- The role of monetary innovation in creating a modern, mass consumer society, starting in America and the emergence of the newly enfranchised, powerful, middleclass, female shopper in the 1920s;
- The monetary bungles that brought about the fall of the Weimar Republic and the rise of Hitler; these included excessive Allied demands for war reparations, hyperinflation, the withdrawal of American loans after the Wall Street crash and the refusal to reflate the economy in a timely manner;
- The important lessons German thinkers learnt from the failure of Weimar about the need for stable prices; these had a lasting influence on post-war (West) Germany and on the design of the European Central Bank; an important lesson they could also have drawn from the war reparations debate (but failed to) was how to treat a sovereign debtor country (e.g. Greece in 2015);
- The enormous, futile efforts that were made essentially to eliminate money not only in the Soviet Union but also in other states, at the cost of millions of human lives;
- The agreement among economic historians that money mismanagement was the major cause of the Great Depression of the 1930s, coupled with the disagreement about whether the mismanagement consisted of fuelling the pre-crisis boom by creating too much credit and money or rather consisted in not creating enough credit and money when the depression hit and banks started collapsing;
Other chapters look at the reasons behind events, for example:
- How the genius of a few economists rescued capitalism—but only when society was ready to receive their messages;
- Why two global conflicts were needed for the Western idea of money to triumph;
- How America used its money power after World War II to make the world safe for its idea of capitalism and build a new world order—and how China is following 70 years later with the most aggressive use of money power the world has ever seen;
- How a social consensus on the relative unimportance of money in life and low social status of bankers supported controls on money and suppression of interest rates and markets, curbing the power of money for a generation;
- How private sector financial innovation put pressure on governments to free money and capital flows in the 1970s and 1980s, resulting in the formation of a global money space—a space within which money moves easily and at low cost;
- Why a rising tide of new money eroded the walls erected around the economies of the Soviet Bloc, contributing to the collapse of Communism;
- How Western triumphalism and the ‘end of history’ narrative in the 1990s led to hubris and Money Delusion that in turn caused over-borrowing and financial crises;
- Why the launch of the euro was a project typical of the Money Delusion of the late twentieth century;
- Why the dominant forms of capitalism are its most corrupt forms, such as state capitalism, crony capitalism and surveillance capitalism;
- Why anti-capitalist and anti-money messages still have power to move people;
- How central banks learnt to control the value of money reasonably well in terms of preventing excessive inflation or deflation and why this came at a high cost of multiple asset bubbles and rising inequality of wealth.
One conclusion is that societies can and do change their money quite rapidly. Monetary rules and procedures do not form a static, hard, inflexible system. Yet this is often how they appear. We may feel that we have to accept them blindly—an image carefully cultivated by the powers that be. But appearances are deceptive. People can reform money—not only the official arrangements, such as the exchange rate system and central banks but also informal habits, norms and standards of ethical behaviour. What is needed to make change happen? Not primarily economic expertise but rather imagination, determination and an awareness of the priorities and needs of society (I refer here to democratic societies where the use of force to impose a system is out of the question).
Aims
More broadly, the essays in this book have three main aims: first, to describe and explain the emergence of a global money space and society; second, to show the wide-ranging implications of these developments, including the downsides; and, third, to make the case for deep-seated change in our outlook. I suggest that we can look to fields ranging from sociology to philosophy and the visual arts for ideas to support the needed change in outlook. Ideas, beliefs and attitudes play critical roles. I shall argue that ideas—in this case, ideas about money—have had as great an influence on events as material interests. Now we need new ideas more than ever.
It is true that money is, in many ways, just another technology. It is, however, more than a tool. It gives holders of money potential command over all other tools. It can come to play such a big role in our lives that it exercises undue influence over us, shaping our futures in ways we may not really want. This is, I believe, the case at present. This is a dangerous moment. As individuals we can reclaim autonomy. The same goes for our societies. But it will need a deeper understanding of how these forces shape our world.
Compare the world of 1900 with our own. Then, as now, evidence of social improvement was all around: people saw progress in fighting diseases, in access to clean water, cleaner city streets, electric light, railways connecting places hundreds or even thousands of miles apart, and rapid intercontinental communications enabled by a complex web of telegraphic cables. Almost every day, it seemed, saw some fresh technological miracle. They could expect such progress to continue.1 We know their world was about to be shattered by World War I. This conflict also destroyed their monetary order, a pillar of their civilisation. It would take 100 years and many social experiments before a viable global money linking people all over the world through technological networks would re-emerge. Are we, like our ancestors, heading towards disaster without being aware of it? Will the world we have built with our money and our imagination also prove to be unsustainable? Cracks have appeared in the facade, as they did before World War I.
In a world tied together by markets and monetary networks, there is a sense that something is fundamentally wrong, that our societies are heading in the wrong direction. But we should not despair.
A Distinctive Global Culture
The emergence of ‘the global money space’ followed by a widely shared culture were world-changing developments. Arising in the heartlands of capitalism in Western Europe and North America in the latter part of the twentieth century, they acquired their present (2020) form and global reach in the decade following the financial crash of 2007–09. They were the unintended result of actions by states and the private sector over preceding decades. Many elements can be traced back to specific episodes and innovations of the past.
I show that almost every decade since 1900 left an impact. The innovations, theories and practices that form the present system were, when first introduced, sometimes shocking and controversial. Conditions that people at the time took for granted as natural and normal are often revealed to have been unstable and evanescent. As regards our global culture, history suggests that a few elements of it will endure, but we cannot know which.2 We cannot know, either, what forms ideas of money will take in the future.
The scope and global reach of our culture are unprecedented. It is true that a mercantile spirit has flourished in many ages of history—think of Venice in the late Middle Ages, the city states of the Renaissance, the Dutch Golden Age, the United States in the time of the Robber Barons. But there is a big difference between those times and ours. In former times, mercantile values existed alongside other values, customs and beliefs. Groups had different ways of life. These included the military, the clergy, the landowning aristocracy, farmers, craftsmen, artisans, and professional bodies and guilds (and, indeed, after the industrial revolution, traditional working-class culture). Each had its distinct standards of ethics. Now all these competing outlooks and ways of life are giving way to a single, unitary approach. Also, this approach is attached to a financial, industrial and commercial system vastly greater in scope and power than any witnessed before.
Global E-commerce
Global e-commerce is among the pervasive influences inducing participants to adopt an outlook on ...