"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.

Personal Power and Political Power

“Money is power” is a cliché. That wealth leads to power, and vice-versa, is so well-known that an important underlying question is often missed. One finds arguments about which of the two is the more important for the commercial elite in our society – again missing that underlying question.

The important underlying question that’s often missed is this: what KIND of power? Are we discussing political power or personal power?

Political power is the ability to influence governing institutions. It’s held (obviously) by elected officials. Barack Obama, at present, has a great deal of political power. He can issue orders and have them carried out by the agencies of the U.S. government, by the United States military forces, and by the Democratic Party which he heads. He can use the persuasive power of his office to influence votes in Congress. To a lesser degree, all elected members of Congress also hold political power, as do Cabinet members and other important unelected government officials and those holding office in state and local governments, or in foreign governments throughout the world. Political power is also wielded by those who don’t hold government offices but who, through campaign contributions and lobbying, or through the ability to persuade a following among the citizens, can influence the actions of the government. Most of the time, when people speak of “power” being held or valued by the commercial elite, this is what they mean: the ability to influence government actions by means of persuasion and bribery.

If that sort of power, political power, is what we’re talking about, then I’d have to say on the whole – with a few exception – that money is more important to the commercial elite and power is only a means to the end of amassing more money. But there’s another sort of power that lies, I believe, at the heart of all desires to become mega-rich in the first place. Sometimes, for some people, it lies at the heart of a desire for political power as well. Both money and political power can be means to the end of amassing personal power: the ability to make other people, as individuals, into servants of one’s own will. Political power, in extreme or archetypal form, is exemplified by the dictator. Personal power, in extreme or archetypal form, is exemplified not by the dictator but by the slave owner.

Personal power is embodied in the powerful by a sense of superiority, and in the powerless by a sense of inferiority. Personal power lets a powerful person look at someone over whom he has power and say to himself – and, through various gestures and subtle means of communication, to his inferior as well – “I am better than you,” and makes the inferior say in the same ways, “You are better than I.” Unlike political power, it’s a very primal sort of power, with roots going back to the origins of our species. It pumps the body full of adrenaline and testosterone, or churns the guts with loathing, fear, and self-hatred.

Personal power is a man’s ability to seduce another man’s wife right in front of him, and have her be afraid to say no and him be afraid to do anything about it. Personal power allows a person to demand that others bow and scrape and show their submission. Personal power allows cruelty to others without penalty, and enables retaliation for even the most minimal slights. Personal power is what the power-hungry desire on a visceral level, and freedom from anyone having personal power over us is what we mean in our hearts by the word “liberty.”

Personal power is a face-to-face thing. Unlike political power, it isn’t impersonal power over the masses, but one-on-one power over an individual. It’s the ability of one individual to make another grovel, serve, and obey.

Government officials seldom hold personal power over ordinary citizens – we seldom interact with government officials in any direct way. They have personal power only over their employees, interns, and so on, and those who come within the purview of their immediate jurisdiction under the law.

Employers, on the other hand, always have personal power over their employees. We have laws protecting the rights of workers for that very reason, to limit the consequences of personal power. Landlords have personal power over renters, and we have laws protecting tenants’ rights for that reason. All such laws were fought tooth and nail by employers and landlords when they were proposed, partly because obeying them is often an expense, but in large part because it removes some of the payoff of personal power.

Every time an employee successfully starts a small business, or becomes self-employed, he gains freedom. The commercial elite may still have a lot more money than he does, but he is no longer dependent on any of them. No employer holds personal power over him. Every time a person buys his own home, he gains freedom. No landlord holds personal power over him.

That’s the underlying, unspoken reason why the pressure is on to keep wages suppressed in America. It’s not the only reason, of course; it’s reflexive for business owners for whom wages are a cost to be kept down, and who seldom consider the larger picture. But as long as wages are kept low, the number of people who will be able to escape from wage work and become free is limited, and so is the number of people who will be able to afford their own homes. With more and more money funneled to the very rich at the top of the ladder, they have more money to play with and gamble with, but at least as important is that the majority of the people are kept on the treadmill, where they can be controlled. Where they can be told what to do, and made to serve.

Personal power needs to be recognized and understood. We need to stop thinking “government” reflexively when we use the word “power.” Sure, government power is important and potentially dangerous. We need to make sure it is restrained by the three safety controls we put on it: separation of powers, public accountability, and explicit limits of government action such as the Bill of Rights. When these become frayed, as they have in recent years, we need to restore them.

But on a visceral level, the government is not what most people think of when they imagine freedom. They think of their boss, or their landlord, and being able to tell them to shove it. They think of being in a situation where no one can tell them what to do. The real enemy of freedom in a democracy is not the government, but rich and powerful individuals able to exercise personal power. To judge whether a government is a tyranny, a good rule of thumb is to ask to what extent it serves the interest of rich and powerful individuals – helping them to exercise personal power over others. To say that government secures and protects people’s rights is another way of saying that it protects the weak from the strong. A tyranny instead aids and abets the strong in dominating the weak.

Of course, the rich and powerful often try to confuse the issue by saying that a government interfering with their freedom to tyrannize others is a tyranny, and to them, it is – as it has to be; if it weren’t, it would be a tyranny to the rest of us. In just that way the slave owners of the antebellum South complained of the tyranny of Washington. We need have no more sympathy for our capitalist masters today than we do in hindsight for the plantation masters of yesterday.

The Advanced Civilized Paradigm I: Work

I’m going to be writing a series of blog articles about far-future changes. This is the first one. In writing these articles, I’m not going to be addressing current events or immediate problems (which means I may interrupt the series from time to time with something that needs more urgent attention), but rather considering long-term implications of advancing technology and the changes that it brings. I’m calling this series “The Advanced Civilized Paradigm.”

Here’s the basic idea behind the Advanced Civilized Paradigm. If we look at the way our precivilized ancestors lived from the first emergence of the human species, somewhere between 100,000 and 200,000 years in the past, until the development of agricultural communities around 10,000 years ago, we find a persistent pattern. People lived in small communities of mostly-related people. They had no formal government or organized religion. This pattern persisted all over the world wherever people lived by foraging and hunting, for tens of thousands of years. This kind of persistent pattern or template of society I’m calling a “paradigm,” and this original, very old one in particular I call the “Precivilized Paradigm.”

Over a few thousand years, the early agricultural communities developed into city-states, and as they did, another pattern emerged that was also found all over the world, and that lasted for a long time, although not nearly as long as the Precivilized Paradigm did. This pattern included hereditary monarchy, a hereditary warrior-aristocrat elite class, a class of slaves or serfs at the bottom of the heap who worked for the benefit of the elite under threat of force, formal state religion, subordination of women to men. This pattern can be seen all over the world wherever people lived in cities in agrarian communities, with only rare and partial exceptions. It lasted from the emergence of the first city-states in the fifth or sixth millennium BCE and endured until relatively modern times. I call this pattern the “Classical Civilized Paradigm.”

Starting in Europe in roughly the 16th century CE, this pattern began to morph into something different and we’re still in a transition stage. It’s not at all clear where we’re going, but we certainly haven’t achieved any stable form that is likely to endure for as long as the Classical Civilized Paradigm did, let alone the Precivilized Paradigm. Maybe there won’t be any. Maybe we’ll just continue in a progressive upheaval forever. Or maybe not; maybe there’s a practical limit on the advance of technology and the social changes that accompany it, beyond which we’ll continue to progress but more slowly, with refinements on what’s already been developed, but nothing revolutionary, the way the printing press was revolutionary, or the steam engine, or electricity, or radio, or the assembly line, or the robotic factory, or the Internet.

For purposes of this writing series, I’m going to assume the latter is the truth: that there’s a practical end to all this, however far we are from it at the moment. With that in mind, I’m going to explore some logical “end states” of visible developments.

What will the economy be like when there is no such thing as a job?

What will religion be like when there are no barriers of language or communication?

What will government be like when instantaneous voting becomes a reality?

What does human mean in a world of genetic engineering and artificial intelligence?

I will deal with the first of those today in this entry.

What An Economy Does

An economy is a social arrangement that produces and distributes wealth. By “wealth,” I mean goods and services. (Money is not wealth. Money is a medium of exchange whereby wealth is traded.) Note that this description has two functions: production and distribution. An economy produces goods and services and gets them to the people that need or want them. An economy that succeeds in doing this is successful. An economy that fails in either function breaks down and fails in both. You can’t distribute wealth that hasn’t been produced. If it has been produced and you fail to distribute it, the economy stops producing it, too.

There are of course many ways of producing and distributing wealth, of varying sophistication. But no matter how complex the economy, or how many layers of esoteric financial manipulation are constructed on top of it, in the end it comes down to those two things. Can the economy produce enough wealth for everyone? Can it spread that wealth around so everybody has enough? To the extent it answers both questions “yes,” it works.

Now let’s consider a specific economic transaction and how it serves both functions at once: wages for work. First, we have to understand that our society assigns “ownership” of the material resources necessary to produce wealth on the basis of history, going back to someone who, in the far past, was able to grab those resources and hold them by force. In America, that generally means a white person who seized them from Native Americans. In other parts of the world, it’s slightly different, but it always comes down to forcible seizure at some point along the way. (Of course, if you look at the Native American from whom the white person seized the resources in question, and trace ownership back from that point, you find that somewhere along the way a Native American seized the resources from another Native American by force, too. The point here is not that white people are more wicked than Native Americans, but that ownership ultimately derives from piracy.)

Since the initial seizure, the property may have been traded many times by more peaceful and voluntary means. The history of these transactions ascertains who owns the material resources that are necessary to produce wealth. By societal convention, all wealth produced is considered “owned” by the “owner” of the material resources necessary to produce it – that is, of the land, natural resources, factories and infrastructure by which wealth is produced – and not by the people who do the work to produce it. The people who do the work to produce it, since they don’t own the wealth being produced, and can’t be coerced into doing the work by main force, must be paid to do it. That’s how our society has set things up, and how wealth is both produced and shared. Wages motivate workers to work, thus facilitating the creation of wealth, and at the same time provide workers (which, please note, means most of the population – this is important) with money (tokens of exchange, remember) that they can exchange for wealth (goods and services). In that way, wages also facilitate the distribution of wealth. They are the mechanism by which the wealth our economy produces is put into the hands of most of the people who receive it.

With me so far? It’s easy to take all of this for granted and consider it an artifact of nature, but every bit of it is a societal convention. There’s no reason why we MUST assign ownership of material resources to individuals, or say that the wealth produced is owned by the people who own the resources used to make it, that’s just the way we’ve done things for a long, long time, and so we seldom question it. What we have is a system in which rich and privileged people buy the labor of almost everyone else and then sell them the goods and services that their labor produced, thus resulting in a distribution of wealth. In terms of economic function, that’s what’s going on. Money (tokens of exchange, remember, not wealth) goes in a circle. It goes from the rich and privileged to everyone else, then it goes back to the rich and privileged (allowing wealth to be shared out to most everyone in the process), and the whole cycle starts over. The flow of money is two-way and circular, but the flow of wealth is one-way and linear.

Let me note in passing (I’ll come back to it) that wages for work aren’t a terribly good or reliable way to distribute wealth. They’re better than nothing, but they tend to distribute wealth rather poorly, resulting in frequent breakdowns of the economy such as we are currently experiencing. Wages tend to drop below productivity, and have to be propped up with regulations and laws and unions and other measures that fight against this tendency, and that doesn’t always work, as in fact it’s not working now. Keep that in mind as I discuss a long-term trend and take it to its logical conclusion.

With any work that’s done for pay, it’s theoretically possible to replace human beings by machinery. As a practical matter, for the present it’s not possible to do this with all work, but it’s increasingly possible with more and more of it. A tiny fraction of people work in agriculture today as did 150 years ago. Manufacturing as well has been increasingly automated (except in some poor countries where labor is actually cheaper than machines). Some services have been automated, too. For example, if you call the customer service department of many a company, you will find yourself talking to a voice-recognizing computer program that fields your questions or complaints. Such programs cannot, at present, completely replace human beings in customer service, but they can do the simpler sorting tasks and answer the easy questions that used to be done by low-level CS operators, and pass the hard stuff to humans just as low-level clerks would once pass hard questions to their supervisors. In principle, there is no reason why a machine could not be made to do any and all service work whatsoever. Machines could, in principle, run businesses, conduct sales, do scientific research, give artistic performances, or even perform the services of the sex trade. Some of these things would require considerable advances in technology over what is available at this time, but none of them is demonstrably impossible.

Let’s take this to its logical conclusion. Imagine a world in which machines can do anything human beings can do as well as humans or better. Every company that needs labor for any purpose no longer hires people, it buys or leases machines. Not only does it not hire any workers for the factory floor or the secretarial pool, it doesn’t even hire executive officers. Forget today’s CEOs of mega-corporations getting multimillion dollar bonuses. They’re unemployed, too. In fact, everyone is unemployed, and the only people who can make any money are the stockholders of the corporations.

Only problem is, they can’t make any money, either. The goods and services the companies are producing can only be sold to people who are making money, and under that scenario that means only to the stockholders. And there aren’t enough big stockholders to buy enough to keep business profitable – so everyone goes broke, the economy fails, and everyone in the world starves to death, leaving a world populated by nothing but robots.

Well, of course it wouldn’t actually go that far, because as soon as things got bad enough to really tick people off, we’d have a revolution of some kind. As this system we have in which rich and privileged people buy the labor of everyone else and then sell them the goods and services their labor produced goes from sort-of-working to not-working-at-all, it will be replaced with something that works better. But what?

Remember the exception above to “nobody’s making any money”? Stockholders still have wealth to trade and can still buy stuff, at least until the whole economy collapses. So a system in which all the work is done by machines would work just fine as long as everyone is a significant stockholder. Or, to put it another way, in which everyone has an owner’s share of the wealth produced.

In the far future, I believe that’s what we will have. We’re still a long way from it, but it’s the way our descendants will live.