Let us play a game. Suppose you are a baker. You want to get eggs and flour just for your bakery. Plus you also want to get some clothes to work in and a few other food staples to live on. You would need to trade the bread you have for everything you need. What if the people who have what you want don’t want your bread? This is too hard. What if there was something that everyone wanted, didn’t expire, could be verified in its authenticity, and could easily be traded. We call this money, thus we have a natural account of how money arises from human nature.
But why would you be a baker if you have trouble securing the necessary ingredients. Specialization takes time and you need stable access to materials. Bartering is actually extremely hard, it presents a lot of transaction costs. The example proves that moving from barter to currency is an efficiency improvement. But why even use barter in the first place? Why not just live in a communal society and operate on familial mutual aid. This was in fact how people are said to have done it for many years. So why would they dissolve this familial system and move to wildly inefficient barter? It actually doesn’t add up logically nor historically.
To prime us for unraveling this mystery I want to explore another similar question put forward in this trashy “Socialism is Cool!” book, The People’s Republic of Walmart. This whole book is just a collection of interesting points, surrounded by a sea of points that invoke the thought, “ah this is why I am not a socialist!” They make an interesting point that has some merit and can be defended on many grounds, but I would think is easily identifiable as largely misplaced.
In most jurisdictions, the electricity systems that were once in public hands have long since been privatized; therefore governments committed to efforts to decarbonize electricity companies have had little choice but to employ market mechanisms such as emissions trading or carbon taxation, rather than reducing greenhouse gas emissions via democratic fiat—that is, simply ordering the electricity provider to switch to non-emitting fuel sources.
So this point seems like a no duh critique of the market. Pollution is a potential threat to our lives, it seems crazy that we are leaving it up to markets. Why not just allow people to come together democratically and control pollution. That seems like a fair solution to our problems in life. But why would I think this is a dumb way of going about things?
Instead of thinking about individuals, let us think about the idea of a society. You could connect this to a bunch of individuals coming together to establish rights in a liberal sense. But let us say that this society has modern problems. We have pollution and we want to establish a right to clean air. What does a right to clean air even mean? We would want to keep the pollution in the town under a certain threshold, whatever we define as clean air. This then presents us with this scarce resource called “the right to pollute” we have created as part of being in a society and then we have a problem of how to distribute it.
Now the solution that many economists put forward is that we should solve our issue by simply having a market for pollution. Suppose that you have to settle the question of two people wanting to pollute. One of them polluting will be fine, but if both pollute it would destroy our right to clean air.
|Profits (Pollution)||Profits (Green)|
What we can see here is that Person A has much more to lose in terms of profits by switching to green energy. So they would much prefer to keep polluting so they can avoid losing out on that $50 difference in profits. Now Person B will only lose $30 by switching to green energy sources. Why should we have them come before a democratic body and break down their expenses, where they could lie or use their popularity to gain an advantage. We could just hold an auction where they can bid on how much pollution is worth to them and then we can all enjoy the benefits of people bidding its worth. Then people who can most efficiently cut pollution will and those who can’t will have to pay the cost. This is actually very straightforward and easy to manage compared to trying to regulate them in other ways. It also ensures that we have a right to clean air and we efficiently allocate pollution rights.
This is solid and it works, but it is actually contrary to a libertarian account of society and markets. What do I mean by this? Here the market is just an accounting tool that was established by a society to efficiently allocate a resource. It has nothing to do with private individuals establishing markets based on purely voluntary means. There is a contract that has state backing and violating it will meet rath by the state. We are making assumptions about robbing Peter to pay Paul. In this sense, we are saying it is a social good to harm the polluters by charging or restricting them and giving everyone this social construct called clean air.
Let us try another story about a group of people living in a stateless society. What if a gang of thugs takes over your community and extorts you with violence to support their armed men. They want the baker to bake them bread and the tailor to make them clothes. But then you have a few issues here. How do you extract the value from these people? If we are talking about farmers, it might be easier to say take a share of the crop from the field. But when you get to clothes and other stuff people need that varies in quality and availability. This presents a problem for how to efficiently extract resources for people. Here is an efficient idea: what if the gang just paid their thugs in tokens and forced the people to pay the gang these tokens in the form of taxes. The people can figure out the best way to get tokens by providing for the needs of our gang. They value these tokens because of the violence imposed by the gang. This is the implications of the state theory of money.
Here we have two narratives about the nature of money and markets: the land of barter and the state theory of money. One explains the utility of money for trade between individuals and the other explains the utility for a society to guarantee a currency. Both expose the utility of markets and money.
We recognize here that money is simply a tool for accounting. Money is created by the authority that it can be redeemed for something of value.
In the case of gold, it is the scarcity and physical properties. You can verify the purity and the authenticity of the gold. It has scientific properties that make it a good store of value once people realize and take advantage of these properties. It is not merely that something is a commodity that allows it to be money, but the authority that it is a store of value.
We realize this today as you can see bitcoin is not a commodity. It is something with authority and power behind it. It is guaranteed by mathematical encryption and a distributed network of computers. This is raw power and authority. In the case of leveraging hard to reverse hash-functions, your money is backed by the certainty of math. On the other hand, a crucial part of the system is the distributed computing power. This is something which is contingent on participation, it is a construction of the participants.
The bank has deposits and loans. They in fact create money by promising to pay out the money in a checking account while loaning it out. Despite their theoretical inability to settle all debts without going broke, the money in your checking account has value because of the reliability of the bank to pay out.
In the case of something like a gold coin minted by a king. It is not merely just the gold in the coin. First of all why would the king mint such a coin if it was merely equal value to the metal? It is backed by the authority of the king: his army and his economy. If the king fails, well it can fall back on its other properties. But the purpose of making the coin is contingent on the authority behind who accepts the coin. The market is set up as a means for the king to borrow against. You must render unto caesar that which is caesar’s; these are the coins with caesar’s face. He can issue a token that is backed by and redeemable for his tax revenue.
The issue that arises is that we realize that creating markets and money are the best methods to bankroll the government. It reduces to calculation and acts as a way to best extort people. But the issue is whether this is justified. People would assert that we have a cosmic debt to society that the government assumes the right to collect. Someone like David Graeber in his book Debt: The First 5000 Years points to a few issues with these ideas.
The history of people entering into debt relationships was your family being taken away and put into slavery for not paying these debts. Today, instead of banks facing the consequences of making bad loans, we force third world countries to pay for the debts taken for the benefit of their previous dictators. Why do the rules established and norms of the market exist? Well largely a lot of the rules and organization of markets have been created and shaped by the state for the benefit of the state. It has been taken for granted that these relationships are moral. If you can’t pay your debts, then you will be hauled off into slavery or atleast severly deprived. If you can’t pay your debt to society, known as taxes, you will also be brutalized. These debt relationships are used to justify violence against others.
Why should we phrase our obligations to others as a debt? We pay our taxes because we owe a debt. A debt to whom? Well you might say we owe a debt to society for making us. Your life is on loan to the people behind it. People even suggest this original conception of debt was a religious idea. The gods created everything in life and you give sacrifice to service the debt. But the question arises here, do you really want to repay your debts? You must return the principle, which means that to pay back your debt means to forfeit your life.
These ideas of who made you are complex and almost cosmic. You helped your neighbor, your friend helped you, your government made the road, as a farmer you grew food people ate, and the gods created the universe. These are all things which we can say make us debtors and creditors. We all have helped and been helped in a complex nature that could be connected back to an idea for an obligation to your fellow man. This is very plausible, but does this really justify the acts of government? Our debts to our parents are not the same as the debt to a government. One is a moral obligation and the other is a forced specific quantity of resources extracted.
Imagine if the government stated that they educated and invested resources into you; This means that you can’t leave the country. You owe a debt to your society and will be forced to pay it by spending your entire life under us. This is exactly what governments like the Soviet Union did. I don’t think that people owe corporations or governments for any amount of investment. These are just pretenses for groups to enable violence against people.
What we see often is that historically markets were created as a means of efficiently extorting people. The reason this happens is a simple calculation issue. Instead of provisioning resources directly people just extort tokens. The reason governments don’t use socialism and direct management of the economy is that it is simply not an efficient way to run an economy. The most important thing for a strong nation is a strong economy. It would be best for the leaders to allow the market to do its work with little direct intervention. The interventions are not for the good of the people, but for their own interests.
Consider this example: Upon the French conquest of Madagascar, they created a currency and a head tax. Now, the entire population was mobilized as a labor force trying to get the currency their colonial government had printed out of fear of violence. The point of such actions by colonial powers was to get people to think about ways to integrate into markets and act to maximize their output. Of course since the state printed the money and ran the society they would get their cut of productivity. The colonial power was not interested in invading so they can just directly extort people or subjugate them to some sort of socialism, but to integrate them into markets they managed.
This is not to say that market’s can’t exist without a state, but that the specific rules of nearly all markets are created and organized to further a state’s interests. There is evidence that the market had specific political origins. These tactics to create markets were done long ago by the governments of the world and spread as they brought conquest to people without markets. Markets are a very useful tool to further the interests of the state. As long as they are organized and run for the interests of the state. Consider nearly everyone uses money printed and given value by the state and this market activity generates some form of tax revenue for the state; Here I would say that nearly all market activity is organized and run for the benefit of governments.
I recommend giving David Greaber a read. He goes into a lot more detail on a history of debt relationships. I will link to the chapter of Debt: The First 5000 Years I get these ideas from.
In the process of editing this video and putting this out David Graeber has passed away. At the time of recording he was still very much alive. His death is a major loss to anarchism as a whole.