Part I: Philosophy

CHAPTER VII

THE NATURE OF MONEY

OUT of the two conceptions of abstract justice and abstract value, arises an important misdirection of thought in connection with a subject with which we shall become more and more concerned as we proceed; the subject of Money. There are few people who would claim that the money systems of the world are perfect, and the number of such persons is decreasing daily. But when asked to define the various defects in the money system, it is remarkable to notice with what monotonous regularity these ideas of "justice" and "value" are paraded. It is claimed that money is defective because it is not an accurate measure of value, or that it results in an unjust "reward" for labour, but when such critics are asked to suggest a method by which the relative value of a sunset, and say, the Venus di Milo might be assessed, on the one hand, or, on the other hand, what is the "just" return for a given amount or variety of labour, their answers are not usually helpful from a practical point of view. Reams of paper and many valuable years have been expended in endeavouring to define and standardise this thing called "Value," and with it, the methods of relating goods and services to the standard when obtained. The line of thought which is usually followed, is something after this fashion.

"Money is a standard or measure of value. The first requisite of a standard or measure is that it shall be invariable. The money system is not giving satisfaction, money is not invariable, therefore, the problem is to standardise the unit of money." As a consequence of this line of argument, a dazed world is confronted with proposals for compensated dollars varying from time to time in the amount of gold they contain in accordance with the price index, or even with card money out of which holes are punched to represent its adjustment to the physical realities of economics. Nor is the misdirection of thought confined to professional economists. Almost the first idea which seems to present itself to physical scientists whose attention is directed to this problem, is in the nature of a search for some adaptation to finance of the centimetre-gramme-second system of units. Yet perhaps the most important fundamental idea which can be conveyed at this time, in regard to the money problem - an idea on the validity of which certainly stands or falls, anything I have to say on the subject - is that it is not a problem of value-measurement. The proper function of a money system is to furnish the information necessary to direct the production and distribution of goods and services. It is, or should be, an "order" system, not a "reward" system. It is essentially a mechanism of administration, subservient to policy, and it is because it is superior to all other mechanisms of administration, that the money control of the world is so immensely important.

The analogy of the "Limited" railway ticket is for all practical purposes exact, a railway ticket being a limited form of money. The fact that a railway ticket has money-value attached to it is subsidiary and irrelevant to its main function, which is to distribute transportation. A demand for a railway ticket furnishes to the railway management a perfect indication (subject, at present, to financial limitations) of the transportation which is required. It enables the programme of transportation to be drawn up, and the availability of a ticket issued in relation to this programme enables the railway traveller to make his plans in the knowledge, that the transportation that he desires will probably be forthcoming. It is every whit as sensible to argue that because there may only happen to be one hundred tickets from London to Edinburgh in existence, that, therefore, no more than one hundred passengers may travel, as it is to argue that because the units of money happen at the moment to be insufficient (whether they are "invariable" or not), therefore, desirable things cannot be done, irrespective of the presence of the men and the materials necessary to do them. The argument only assumes validity if a deficiency of tickets is a reflection of a real deficiency in transport, and not vice versa.

The measurement of productive capacity takes place, or should take place, in regions other than those occupied by the ticket office, or its financial equivalent, the bank, and the proper business of the ticket department and the bank is to facilitate the distribution of the product in accordance with the desires of the public and to transmit the indication of those desires to those operating the industrial organisation, to whom is committed the task of meeting them. They have no valid right to any voice in deciding either the qualifications of travellers, or the conditions under which they travel.

It will no doubt be observed that there is a close connection between the point of view which it is here suggested is vital to a solution, and the contrast indicated in the opening chapter of this book, between the Classical and the Modem system of education. Just so long as a rigid abstraction is made the test to which physical facts must conform (and any theory of money which pretends to measure values comes under this description), just so long must there be friction and abrasion between the theory and the facts (and facts are much harder than theories). Dissatisfaction and disappointment in the world as a result, can be predicted with certainty. In other words, Utopia is - Utopia. It has been said before, but it will bear repetition. The picture and specification of the world people desire at the present time, is, like the kingdom of heaven, within each one of them, and their desires in general are not more likely to be satisfied by a card-indexed Paradise after the heart of M. Stalin, than by an Imperialistic millennium ruled by Mr. Kipling's "Aerial Board of Control." It is quite arguable that material wealth, with the emancipation it can carry with it, will not bring happiness, but it is not arguable that the vast majority of people will take this truth, if it is truth, on hearsay. It is as probable that a starving man will listen patiently to a lecture on gluttony.

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