Friday, November 14, 2014

The point of money is that it makes intermediation easy

From John Michael Greer’s essay; Dark Age America: The Hoard of the Nibelungs
Thus the logic behind money pretty clearly isn’t what the textbook story claims it is. That doesn’t mean that there’s no logic to it at all; what it means is that nobody wants to talk about what it is that money is actually meant to do. Fortunately, we’ve discussed the relevant issues in last week’s post, so I can sum up the matter here in a single sentence: the point of money is that it makes intermediation easy. 
What’s more, once intermediation is reduced to such crassly physical terms, it’s hard to pretend that it’s anything but a parasitic relationship that benefits the intermediary at everyone else’s expense.
Intermediation, for those of my readers who weren’t paying attention last week, is the process by which other people insert themselves between the producer and the consumer of any good or service, and take a cut of the proceeds of the transaction. That’s very easy to do in a money economy, because—as we all know from personal experience—the intermediaries can simply charge fees for whatever service they claim to provide, and then cash in those fees for whatever goods and services they happen to want.

The Norwegian supermarket chain REMA 1000 is a typical example of a parasitic intermediary that has inserted itself between the producer and the consumer, by the help of money. Without money everybody would see the Reitan family for what they really are, thiefs.
Imagine, by way of contrast, the predicament of an intermediary who wanted to insert himself into, and take a cut out of, a money-free transaction between the pig farmer and the dentist. We’ll suppose that the arrangement the two of them have worked out is that the pig farmer raises enough lambs each year that all the Jewish families in town can have a proper Passover seder, the dentist takes care of the dental needs of the pig farmer and his family, and the other families in the Jewish community work things out with the dentist in exchange for their lambs—a type of arrangement, half barter and half gift economy, that’s tolerably common in close-knit communities.
Together with the evils of suburbia, our monetary system has erased even the faintest shadows of close-knit communities. Image: C. Cossa
Intermediation works by taking a cut from each transaction. The cut may be described as a tax, a fee, an interest payment, a service charge, or what have you, but it amounts to the same thing: whenever money changes hands, part of it gets siphoned off for the benefit of the intermediaries involved in the transaction. The same thing can be done in some money-free transactions, but not all. Our intermediary might be able to demand a certain amount of meat from each Passover lamb, or require the pig farmer to raise one lamb for the intermediary per six lambs raised for the local Jewish families, though this assumes that he either likes lamb chops or can swap the lamb to someone else for something he wants.

What on earth, though, is he going to do to take a cut from the dentist’s side of the
Here we see the point of money. Image: ProjectManhattan
transaction? There wouldn’t be much point in demanding one tooth out of every six the dentist extracts, for example, and requiring the dentist to fill one of the intermediary’s teeth for every twenty other teeth he fills would be awkward at best—what if the intermediary doesn’t happen to need any teeth filled this year? What’s more, once intermediation is reduced to such crassly physical terms, it’s hard to pretend that it’s anything but a parasitic relationship that benefits the intermediary at everyone else’s expense.

What makes intermediation seem to make sense in a money economy is that money is the primary intermediation. Money is a system of arbitrary tokens used to facilitate exchange, but it’s also a good deal more than that. It’s the framework of laws, institutions, and power relationships that creates the tokens, defines their official value, and mandates that they be used for certain classes of economic exchange. Once the use of money is required for any purpose, the people who control the framework—whether those people are government officials, bankers, or what have you—get to decide the terms on which everyone else gets access to money, which amounts to effective control over everyone else. That is to say, they become the primary intermediaries, and every other intermediation depends on them and the money system they control.

This is why, to cite only one example, British colonial administrators in Africa imposed a house tax on the native population, even though the cost of administering and collecting the tax was more than the revenue the tax brought in. By requiring the tax to be paid in money rather than in kind, the colonial government forced the natives to participate in the money economy, on terms that were of course set by the colonial administration and British business interests. The money economy is the basis on which nearly all other forms of intermediation rest, and forcing the native peoples to work for money instead of allowing them to meet their economic needs in some less easily exploited fashion was an essential part of the mechanism that pumped wealth out of the colonies for Britain’s benefit.
The Africans are still enslaved by white man's monetary system
Watch the way that the money economy has insinuated itself into every dimension of modern life in an industrial society and you’ve got a ringside seat from which to observe the metastasis of intermediation in recent decades. Where money goes, intermediation follows: that’s one of the unmentionable realities of political economy, the science that Adam Smith actually founded, but was gutted, stuffed, and mounted on the wall—turned, that is, into the contemporary pseudoscience of economics—once it became painfully clear just what kind of trouble got stirred up when people got to talking about the implications of the links between political power and economic wealth.

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