"Making Money"

Our language has many peculiarities that shape thought in hidden ways. One example is the phrase "make money."

Strictly speaking, nobody "makes money" in this country except the mint. Money is legal tender, and neither private individuals nor corporations are authorized to "make" it. To do so is a felony. When we say that someone "makes money," what we really mean is that the person takes money: he persuades other people to give him money in exchange for something else, be it goods, services, promises, or deception. No money is actually made in these transactions, by which I mean that the overall money supply does not increase; what money the person who is "making" it gains, his customers lose in an exact one-for-one correspondence. Of course, that's not necessarily a bad thing for the customers, since money also has no intrinsic value whatsoever; it gains value only in exchange for other things that DO have intrinsic value, and the only reason anyone is willing to take intrinsically worthless money in exchange for intrinsically valuable things is because the money so acquired can then be given away to someone else in exchange for other things of value. Money is at root a confidence game in the literal sense of requiring a faith in the system of government that backs it and a confidence that it can be exchanged for items of value, even though it has no value of its own, and because of this disconnect, this one-off between the medium of exchange and the items of actual value, it can also be a confidence game in the figurative sense.

Really it all comes down, not to money, but to stuff: goods, services, promises, or deception. Money is not wealth. Goods and services are wealth; money is only a token exchangeable for wealth. One cannot "make money," but one can make wealth, by making goods or performing services. Ideally, that is how a person or a corporation "makes money" -- by making wealth, and exchanging the wealth for money, which can then be re-exchanged for more wealth. The amount of money doesn't increase, but the amount of wealth does. As a straightforward exchange, there is nothing objectionable about this. But the fact that we employ money rather than barter -- the fact that we exchange wealth not for wealth but for tokens exchangeable for wealth -- means that the potential for abuse, and for confidence games in the figurative sense, creeps in.

Start with the fact that goods and services are, almost without exception, produced collectively, not individually. That is, their creation requires the cooperative effort of more than one person. Most of the people who work to create the wealth have no ownership interest in it (as I explored in an earlier post) and must accept (or reject) a payment in money for helping to create it according to the terms that the owner (usually a corporation) is willing to offer. The potential for abuse in that transaction is of course well known to anyone who has studied the history of the labor movement.

Then there's the fact that money can be exchanged not just for real wealth, but for potential wealth. This is called "investing." Money is paid not for goods or services, but for the potential of being repaid more money than one paid out in the future, which can then be re-exchanged for real wealth. Investments, however, don't always pay off. Sometimes an investor loses money instead of gaining it. This means that a person or a corporation can "make" (or take) money by attracting investors rather than by offering wealth in exchange. To make things more wonderfully and woefully complex still, the person "selling" the investment can then turn around and re-invest the money so gained himself in the hopes that it will pay off more than he ends up paying back to the original investor. And so on, in a tangle of investment and reinvestment. There are whole industries built around this sort of thing, producing no wealth whatsoever but "making" lots of money.

Now the justification for this sort of financial goings-on is that at least some of the money is ultimately used to fund the production of wealth, which, under the rules of our economic game, requires money in order to be done. But it doesn't have to be done that way. All that's really necessary in order for an investment scheme to "make money" is that people who have money be convinced to invest it. A financier can "make money" all day long without producing a damned thing, merely by moving around intrinsically worthless tokens, taking money from others in exchange for promises or, in some cases, for deception.

Even when the money that is being "made" is acquired in the more straightforward fashion, by producing actual wealth and selling it, there is still plenty of room for practices that are anything but straightforward. British Petroleum, for example, is certainly producing wealth (or it intended to anyway) from its deep-water oil well in the Gulf of Mexico. But it acquired ownership of the oil it hoped to pump through a process of leasing the mineral rights from the government that involves a highly questionable exchange of value. Arguably, since the land in question is government property, it belongs to the people of the United States, yet the people get precious little return for it; if BP had to buy the rights for something approximating their real value, that could fund a lot in the way of public services, tax cuts, and/or deficit reduction. On the other end, as what actually happened with that well demonstrates, the law requires the people to pay to clean up any messes that result, after the corporation pays out an amount of money limited by law and, in the instant case, only a tiny fraction of the actual damages. In this particular case, due to the publicity involved and the magnitude of the disaster, BP may find itself unable to make use of that sweetheart deal, but the Gulf oil leak is only a larger-scale version of similar environmental accidents that happen all the time, and other damage that isn't accidental at all.

Running through our economy are rules and practices that twist and warp what should be a straightforward process of producing wealth and distributing it to people into one sort or another of theft. Theft of people's earnings, their savings, their livelihoods, their hopes and dreams, their health, and their lives. And yet, because of the peculiarities of the language we speak, we call all of that "making money."

A curious thing, I say.

Profit Is Theft

One of my purposes in writing this blog is to encourage radical thinking. Not necessarily radical action (although radical thinking does radicalize action to a degree), but thinking that cuts through the false assumptions and intellectual ruts at the roots of a lot of habitual thought in politics, economics, religion, and art. If we can think radically, possibilities open to our consideration that we would never even imagine otherwise.

This week, I want to discuss two concepts that are crucial to any capitalist economy, and that are older than civilization, but much younger than the human race: the private ownership of capital property, and the related concept of profit. These were, for their times, radical ideas. Today, pointing out that they are not inevitable or natural ideas has itself become radical, and so doing that has become necessary.

Property ownership in some forms is as old as the human race, or somewhat older. But the property that our precivilized ancestors owned was all personal property, not capital property. Individuals owned things that they planned to use and enjoy themselves: clothing, tools, weapons, food stores, maybe a tent or a place in the communal dwelling. But no individual owned the land from which all these things came. An individual hunter could own the meat from his own kill, but not the hunting ground. The same hunter could own the spear he used to kill his prey, but not the flint quarry that its spearhead came from. Land was different from other types of property in that it was used to make wealth, rather than being wealth itself. In precivilzed society, it was the property of the band or the tribe, not of any individual. Any property that a person owned, he owned because his own work had made it, or because he had traded something produced by his own work for the product of someone else’s work.

Let’s look a bit more closely at that paradigm of property, because it contrasts greatly with what obtains today.

The source of wealth (the land) is owned communally.

The land is available to anyone in the band or tribe that is capable of making wealth from it.

If a person makes something, then (subject to tribal rules about sharing food and other necessities to make sure no one goes hungry or otherwise suffers unnecessarily) that person owns it. Labor defines ownership.

Private ownership of capital property was introduced with civilization. It created a very different paradigm of property ownership that worked like this.

The source of wealth (the land, and later on industrial plant and sometimes intellectual property) is owned by individuals.

The land and other capital property are only available to make wealth from with the permission of its owner.

If a person makes something, then (subject to laws which take a portion in taxes to cover public expense) it belongs to the owner of the capital property from which it is made. Labor does not define ownership. Ownership of capital property, and nothing else, defines ownership of the wealth produced from it.

Note the difference? When capital property was communally owned, it was labor that defined the ownership of wealth. Each person owned what he worked to produce. But since capital property has become privately owned, that ownership is now what defines ownership of the wealth produced from it. Today, no one owns what he works to produce, at least not because he works to produce it. Ownership is defined by ownership itself. To own capital property is to own what is produced from it, whether you do the work to produce it or someone else does. If you own capital property, that entitles you not only to the fruits of your own labor applied to that property, but also to the fruits of other people’s labor applied to the same. If you do not own capital property, then you are not entitled even to the fruits of your own labor.

This may be counter-intuitive, so let me go into a little more detail. Some may respond: aren’t people paid for their work? Don’t they own the fruits of their labor in the form of their wages or salaries?

No. They do own their wages or salaries of course, but that is NOT the product of their labor. That is the fee paid them for doing the work even though someone else owns the product of their labor. The product of a person’s labor is the goods or services produced by it, and that belongs not to the worker, but to the owner of the capital property the worker used to produce it. What’s more, it is always worth more in sale value than the wages paid those who produce it. As an employee, you are paid only a portion of the value of what your work produces – as small a portion as your employer can pay and still get you to do the job, and certainly never equal to the full value.

This brings us to the related concept of profit. What is profit? It’s defined as the revenues generated by a business minus its expenses. It may also be regarded as the net share of wealth going to the owner of capital property. Or, less even-handedly, it is that portion of the total wealth of an enterprise that the owner skims from the labor of others.

To make this clear, I’m going to exercise a bit of author privilege, or linguistic irresponsibility, and slightly redefine the word. (I have no shame. It’s true. Ask anyone.) For purposes of this writing, “profit” applies only to that portion of a business’ net revenue that is not produced with the owner’s own labor. This means that if you are the sole proprietor of a business with no employees, your business makes no “profits” in this sense, because your labor and no one else’s has generated the goods or services which have been sold to generate revenue. I’m doing this because I want to illustrate something about the great majority of business profits in our economy, which is however not true of situations such as I just described.

Profit, then, as I am using the word, is wealth amassed through other people’s work.

It is in this sense of the word “profit” – although I must emphasize that the vast majority of what accountants call “profit” does meet this definition – that profit is theft. It is the producing of wealth through the labor of other people, who are paid less than the value of the goods and services their labor produces. The owners of capital property – property which, in the natural state that our ancestors occupied for over a hundred thousand years, many times the duration of civilized life so far, was owned communally and not the property of any one individual – are taking wealth that other people have produced, and that in a natural society would belong to the people who produce it. And that is stealing.

But this act of theft is perpetrated by almost all owners of capital property without a shred of guilt, with even less shame than I feel in redefining a word here and there, because it has become endemic in our society and perceived as the natural order of things, no matter how unnatural it actually is. And it is completely unnatural, in two ways. Not only have we redistributed capital property, which in our original, natural societies was held in common, into private ownership, but we have also changed the rules about who owns what is produced from it, so that ownership rather than labor determines ownership. In natural, precivilized societies, capital property was owned by the society, but the society did not own the wealth that was produced from it. The individual that did the work owned the product of his work. (Subject, of course, to rules distributing food to the hungry and such, but that’s functionally equivalent to taxes today, and is a footnote to the process not the main description.) So not only have we gone from an arrangement in which capital property is publicly owned to one in which it’s privately owned, but at the same time we’ve gone from a system in which labor defines ownership to one in which ownership defines ownership. We have done this, obviously, to benefit the owners of capital property, who enjoy enormous privileges both economic and political in a modern society.

As noted above in the first paragraph, I’m not proposing any particular action here. We are long past the time when we could restore communal ownership of capital property, or at least I can’t think of any way to make that work in a modern industrial economy. Then again, perhaps there is a way and I simply haven’t thought of it. Certainly it’s a millennia-old Gordian knot of privilege and power, not easily undone. But the mind is as sharp an implement as Alexander’s sword, and merely to recognize the reality of what is and why serves by itself to put things into a new perspective. Also, there are some consequence of this recognition that all for-hire workers are being systematically plundered by a system designed to create and reward privilege which will be explored in future posts. At very least, this perspective will hopefully give many people the idea that things which have been taken for granted should be changed, which is a prerequisite to the consideration of exactly what they should be changed into.

Next week: slavery, serfdom, and wage work, or, the forms of coercion.

http://www.smashwords.com/books/view/8357