Money doesn’t matter

Well, obviously it does. But the whole ‘government cannot pay for healthcare’, or land, or education : thats nonsense.

And any politician that claims that is either ignorant, or has an agenda that involves deliberate repression of the population.

These are strong claims, so let me break it down. Also, I’m not an economist, if I’ve gotten the wrong end of the stick economics-wise, I’ll happily update this or at least add errata to it…

Money isn’t wealth. Its a thing you can exchange for other things, but it itself is not wealth. Easy example: when countries have had runaway inflation, and the price of e.g. potatoes has been going up 100% a day, it doesn’t matter how much money you have, you will eventually be unable to buy potatoes. But a potato farmer with 10’s of thousands of potatoes won’t run out and go hungry.

We use money to scale our society. Without money, we have some problems. Firstly, if I want something you have, but I don’t have anything you want, I have to find someone who wants something I have, and something you want that they don’t want, and then do that trade, then come back to you to trade the thing you wanted for what I wanted. This quickly becomes a bottleneck on actually getting stuff done. Secondly, once someone, say a potato farmer :), has what they want right now, they will be very hard to trade with : if they trade potatoes for things they don’t want, they are gambling that other folk will want them in the future. That requires everyone to become a good gambler on the future value of things.

But just like money isn’t wealth, money also isn’t work. We work to exchange our time for wealth; except money isn’t wealth, so really we’re exchanging our time for this thing we can exchange for the actual things we want. Government *literally* create money anytime they want, and they destroy it at will too. If there’s too much money floating around, then (at whatever prices folk are used to) everything will be purchasable, and its very likely folk selling stuff will run out and raise prices as a result. Then it becomes harder to buy stuff, although everyone that recieved those raised prices has more money to buy with, so this continues for a while : this is inflation.

Too little money, and things that could be sold won’t sell, because there isn’t enough money at the prices folk are used to, and the folk selling don’t want to “lose money” (which is odd, because money is a promise not a thing, so if you’re in a deflationary situation, selling *right now* may well be better than holding on and selling later :)), so they will be slow to lower prices, will recieve less either way, and just like with increased prices, the decrease gets spread amongst the participants – vendors, owners, employees.

But these things don’t happen instantly :- there’s slack in the system.

So what does matter? What actually matters is a combination of resources and productivity: those are the things that determine whether we, as a society, can produce enough things for our people to have what they want and need. For instance, building a house needs the following resources: land, building materials, labour, power, as well as ongoing supplies of power, water and sewage processing.

If, given the people currently in our country, and what they are being paid to do today, we have both enough resources, and enough labour-and-productivity, to house, feed, heat, transport and entertain everyone, then the failure to do so is not one of money but one of choice. That builder friend you know who doesn’t have work right now could be building a house for that other friend you’ve got whose family is sleeping in a garage. The builder that’s not working because the family in question can’t afford to pay for the land or the resources, and the builder has nowhere to do the building, nor any stuff to make the building out of.

The core choice is : do we as a society think its reasonable anyone should have to sleep rough, or miss out on school, or any of a thousand examples of poverty, when we’ve got the resources and production capability to fix it? Do we think that? Really? And what are we willing to do to fix it? Right now, a lot of the production capability of our society is owned by 1% of our society. So less than 1% of people are deciding what is made and how its made.

Now, there’s a bunch of curly questions like, what about the foreign account deficit? What about the fact that lots of land is already owned by someone? How do we fairly get that family the house they deserve? Won’t some people just ride on the coat-tails of others? Isn’t this going to require taking things other people have already earnt?

These are all fair questions. My answers to those are:

  • If everyone had their needs met we’d have many more people contributing to creative things we can sell to foreign countries, more than enough to address any changes in the foreign account deficit from sorting things out here.
  • Our current system has huge wealth inequality; it doesn’t matter whether that inequality is in the form of money, or ownership of things, either we leave that 1% controlling 99%, or we redistribute things in some equitable ongoing basis. Wealth taxes, CGTs, estate taxes. Lots of options.
  • I’m not sure. I think ultimately it means capping the maximum wealth ratio between our richest and poorest people. e.g. the more wealth you have the more you’re taxed until eventually – at say 500K / year (gross) wealth growth, your marginal tax rate becomes 90%, and at some higher figure, say 1M/year (gross) wealth growth your marginal tax rate exceeds 95%. That way wealthy folk get to choose what things they keep : there’s no central planning department or other bureaucracy involved.
  • Folk already ride on the coat tails of other people. But its nowhere near as simple as ‘those dole bludgers’. Folk on the pension don’t work. Folk with ‘passive income’ (read investments whose growth is high enough those folk don’t need to work). School kids. And yes, folk on the dole. For some folk on the dole, the marginal tax rate already exceeds 100% – there are some steps in our tax system that make part time work while receiving the dole very very hard. Home makers are also something we support as a society. though less directly. But lets assume fully 10% of the country simply don’t want to work. Consider this in productivity terms. We get 10% less things done. Big deal. We’ve enough resources and people to deliver those essentials: food, shelter, power, education, with waaay less than 90% of our workforce. And as automation inproves expect that 90% to drop down towards 10%. At that point we’d want 90% of folk not working, I suspect.
  • Yes, folk will have to get taxed on what they have not just on what they are gaining. This makes sense though: we want the system to slowly drive equity for everyone. (Not equality, and not sameness, just equity). Taxing what you have is actually a lot fairer than taxing what you earn. Because if you have nothing, but start earning a lot, you’re starting way behind everyone else, so not taxing you much is pretty nice. And if you have a lot, but aren’t earning anymore, not taxing you is really just giving you a free pass: supporting you in terms of every single shared resource and infrastructure.

 

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