The Power of Money

Although we all use money every day, the nature and functioning of money seem shrouded in commonplace myths and ancient mysteries. Money plays a central role in economics today, yet rarely do we come across a serious, informed discussion of what money really is and what role it plays in the development of society. Money is a remarkable human invention, a mental symbol, a social organization and a means for the application and transfer of social power for accomplishment. This article is the first in a series of articles exploring the origins, nature and functioning of money and its creative power by comparing money with two other pre-eminent social institutions – language and the Internet.
Money, according to the adage, makes the world go round. And just now the world appears to be spinning wildly out of control, escaping from its traditional orbit and raising the specter of a head-on collision with economy, democracy and the welfare of humanity. Concern with the prevailing monetary system has given rise to calls for abolition of the current system of national currencies, a return to the gold standard, elimination of debt money and interest, reversion to local currencies that were prevalent in earlier centuries, and invention of new forms of money such as energy currency or earth currency linked to productive capacities and natural resources. The plethora of ideas floating around suggest that there is widespread discontent and confusion intermixed with a good dose of myth and superstition regarding the origin, nature and role of money in society.
Rather than hastening to contribute one more solution to the mountain that has been proposed, we may do well to first inquire into the fundamental principles on which money is based and the process by which it has evolved with the development of society. This may help us identify the precise points at which the global monetary system has become vitiated and ensure that any changes we propose are in line with humanity’s evolutionary advance.

1. What is Money?
Money, according to economists, is a medium of exchange, store of value, unit of account. To which other social sciences might add, it is a source of status and social prestige, a provider of physical and psychological security, a contributing factor to human welfare and well-being, a basis for military strength, a source of public influence and political power. But these terms merely describe its major functions without really explaining what money is.

Money is an evolving symbol of economic value and social power. Over the past two thousand years, it has undergone numerous changes in form, content and the source of the value it seeks to represent. In early times, money took the form of objects of intrinsic value such as cows, tobacco, furs, grain, and various metals. It later took the form of intrinsically or ornamentally valuable objects such as precious metals, which acquired symbolic value as a representative for many other objects. It was also standardized in the form of coins minted from precious metals, whose value was linked to their metallic content.

The introduction of purely symbolic money as a substitute for material objects marked an important stage in social development. Symbolic money was created based on trust in an issuing institution, such as the receipts issued for grain on deposit in the Pharaoh’s warehouses or gold on deposit with London goldsmiths, and the myriad bank notes issued by literally thousands of American banks during the 19th century.

Originally intended to reflect existing material assets, money also gradually evolved to represent future intention and purchasing capacity. Promissory notes indicating an intention to pay in future became a powerful stimulus to trade in Renaissance Italy. Wooden tallies issued by the British treasury became prevalent around the same time to represent the Treasury’s future tax receipts. The government bonds so prevalent today constituted an essential foundation for the rise of modern nation-states. Ultimately, this led to the issuance of purely fiat currencies, backed only partially by precious metals and anticipated tax revenues. The real backing for national currencies is trust in national institutions of governance supported by the physical assets and productive capacities of the nation issuing them.

The progressive etherealization of money has given rise to endless suspicions, cries of outrage and conspiracy theories, under the assumption that money is, in essence, a physical thing (like the cows and gold nuggets) which has been corrupted and perverted by evil minds. But the etherealization of money has also taken place during the most remarkable period of development in human history and has been associated with a seven-fold rise in real global per capita GDP, so we are advised to seek to fully understand its contribution to human development before condemning and rejecting it wholesale. Closer analysis will show that the growing power of money has always arisen from its symbolic value. Still we are describing only types of money without yet inquiring into what money truly is. We can better understand the power of money by conceiving of it as a purely human creation.

2. Language as a Social Organization
Throughout history, human beings have striven to develop capacities to enhance their power of individual and collective accomplishment. Some capacities are primarily powers of the individual, such as skill in running, climbing, shooting, fire making, cooking. Other powers, such as language, family and government, can only develop and be expressed in relationship with other people. Money is one of the primary collective powers developed by humanity for social accomplishment. Like language, money is an instrument to promote productive, cooperative human social relationships.

Money is one of the greatest inventions of all time. Like language, money is not a thing in itself but rather a social organization designed to promote and facilitate interaction and interchange between human beings over space and time. Language consists of symbolic sounds and images in the form of words, but those words are meaningless objects until assigned a standardized value by members of the community, so they are commonly accepted to represent the same thing to different people. Language is an arrangement and organization of sounds, signs, letters, figures and words in a sequence according to rules of grammar and diction, standardized forms and established conventions, which facilitate communication of ideas, intentions, feelings, sensations and physical facts.

Language has made possible the evolution of Homo sapiens from merely gregarious social animals through civilization and culture into creative, inventive, thinking, learning human beings governed by values, ideals, ideas, prevailing beliefs, customs, laws and a huge body of facts and knowledge derived from past experience. Language is the foundation and medium for interpersonal relationships, family, community, civilization, culture and all higher human attainments. Language makes possible the preservation of past experience, discovery and accumulated knowledge on which civilization is based; the sharing of experiences, ideas and feelings over vast intervals of time and distances in space; the communication of our deeper emotions on which intimate human relationships are founded; and the formulation of dreams, aspirations and ideals which direct our energies for future progress.

The social organization we refer to as language has endowed humanity with a power for individual and collective accomplishment unimaginable for other species. Language generates power and is a form of power – power for communication, knowledge, relationship, production and exchange, war and negotiated peace, governance, education, scientific and technological development, intellectual inquiry and artistic creativity, recreation and entertainment, romance, religious worship and spiritual enlightenment.

3. Money as Social Organization
Money is also a social organization based on generally accepted symbols, set rules, standardized forms and established conventions. Money too depends on acceptance of common standards for form, unit, value and recording. It is a social organization which includes institutions related to minting, issuing, banking, transmission, accounting, taxation, etc. Though originally assuming the form of objects of intrinsic value, the time is long past since the institution of money evolved more symbolic forms which were easier to transport, store and innovatively adapt to represent non-material forms of value.

As language promotes exchange of ideas, information and intentions, money facilitates the exchange between human beings of goods, services and other things of perceived value. Exchange is the social and economic basis for the evolution of society. Without exchange, each human being must rely solely on his own energies to produce all that he desires or on his capacity to take by force that which is possessed by others. Exchange replaces physical violence and war. It makes possible division of labor, specialization and conversion of one type of good or service into any other type. Exchange is possible without money, just as communication is possible without spoken or written language, but in both cases, they are severely constrained in utility, scope, space, time and effective power without the aid of higher symbolic forms.

The evolution from barter exchange to monetary exchange has resulted in enormous social progress – from isolated rural communities into regions organized around urban centers, city states and eventually kingdoms, nation-states and the emerging global community. The evolution of money has facilitated the growth and development of production, commerce, armies, governments, education, science, technology, urbanization and all forms of art.

Garry Jacobs: Chairman of the Board of Trustees, World Academy of Art and Science;Vice President, The Mother’s Service Society
Ivo Šlaus: President, World Academy of Art and Science; Dean, Dag Hammarskjold University College for International Relations and Diplomacy, Zagreb

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