Jun 17 2007

What is Money? Outing the L-Word Part 3


By Andrew S. Taylor

6/17/07

“This planet has - or rather had - a problem, which was this: most of the people on it were unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movements of small green pieces of paper, which is odd because on the whole it wasn’t the small green pieces of paper that were unhappy.”

-Douglas Adams, The Hitchhiker’s Guide to the Galaxy.

We wish to live in a world where our wages have some objective meaning, and are not simply reflections of unthinking market relativism. But we live in an age of post-modern money, in which our currency - be it paper, plastic, or figures recorded in computer memory - serves as a re-writable “open text” for those to whom the world’s treasuries are entrusted. Its value can be altered by decree, trimmed and nudged with exacting precision in studied correlation to events throughout the world marketplace. As international banking is now completely reliant on electronic credit, we find that money is only sustained as a fact of reality by our own collective belief in it.

And yet, the bills and coins in our pockets feel so damn real. They work flawlessly for their intended purpose in our daily lives, and in these functions they are irreplaceable. Who has not at some point lost a $20 bill to a wayward breeze, and experienced that unique form of despair as it flutters away? In the backs of our minds, we know that the paper itself is worth next to nothing, but that what it represents is something intimately connected to our lives as individuals. It is for this reason that tax-time is such an emotionally difficult period for us - we feel (correctly) that something essential to our livelihoods is being forcibly extracted from us.

We console ourselves with the belief that the government needs to take “our” money to pay for the many social services that keep society going. But, how much must it take, and what stops it, in principle, from taking much more than it currently does? In these moments, we might be inclined to sympathize with the Libertarian position that, in essence, all taxation is theft, and that as long as we as a people submit to compulsory taxes, we have engaged in a Faustian deal whereby no moral imperative exists to prevent our total exploitation by the IRS - that only their scruples stand between us and forced poverty.

The Libertarian argument with regards to taxation and money is attractive because, in its talk of gold-standards and de-regulation, it seeks in principle to restore objectivity - a very important word here - to the currency we use. Surely, they say, the dollar must reflect something beyond the mere whims and machinations of social engineering. It must measure some aspect of reality that exists outside of government designs. This would then provide an epistemological basis by which the concept of currency could be once again directly wedded to the notion of rights.

Let us examine the word “objectivity,” and then, in seeing how it applies to money, determine if the Libertarian arguments regarding currency (and our right to possess it in any amount, no matter how extremely huge) do in fact lead to greater objectivity. Specifically, is the money we earn a true and accurate measure of our rights to procure goods and services from society, in all cases? The crucial thing to keep in mind here is this: for the Libertarian argument to be epistemologically and ethically correct (ethically, because money is a direct expression of the fact that we participate in a social contract), the absolute value of a dollar at any moment would have to be more than an emergent fact of “the marketplace.” It would need to be an objectively accurate measure of the means by which the dollar was earned. If a dollar does not accurately represent, for any holder of that dollar, a reasonably precise measure of the work that went into procuring it, then the dollar is not an objective measurement, but rather a structurally mutable fiction that changes its meaning with every human palm it graces. This latter scenario might benefit certain individuals and harm others, but, most importantly, it robs money of any possible ethical meaning.

What would make currency a socially objective measurement of work? And what exactly do we mean by “objective”? When we say that something is “objectively” true - we do not necessarily mean “true” with a capital “T.” What the term literally means is this: that there exists an external referent, some standardized unit of measurement, by which the properties of different objects or situations can be compared to one another. “I am tall” is a subjective truth - it is true when I compare myself to other people, but not true when I compare myself to buildings. “I am taller than most children” is objectively true, because I can in principle use a ruler (external referent) to prove it. Likewise, “I am rich” is a subjective statement - it’s true if I compare myself to a citizen of Cambodia, and untrue if I compare myself to Bill Gates. It is objectively true that Bill Gates has more money than I do.

BUT…

While it is objectively true relative to monetary currency, the standard of measurement, is it objectively true relative to what money measures, i.e., the extent of one’s social entitlements in exchange for the work one has performed? Specifically, do our differences in wealth accurately correlate, with unitary consistency, to what we actually deserve to procure from society with our wealth? This is what we need to remind the Libertarian: if it is not accurate relative to the x property that money measures, then the statement that “Bill Gates is richer than me” approaches tautology. (Imagine that I measured my height with a ruler whose inches changed length every day according to perturbations in the metric system overseas, and that someone who was only a head taller than me found that his “inches” were one-tenth as long as mine - meaning he is more than 10 times as tall!). Sure, he has more money, but does this money accurately represent his entitlements from society? Likewise, does poverty accurately reflect the social entitlements of the impoverished?

There is one other aspect of objectivity which is crucial, but which is often overlooked - the properties being measured and the external referent itself must exist within the same frame of reference. Let’s take brief diversion into physics to illustrate this point. In physics, we say that d=rt (distance equals rate times time). Most of us experience a world easily described by Newtonian mechanics because we co-exist in the same frame of reference. Moving at essentially the same rate relative to one another, standing as we do on the same earth, we avoid any of the “relativistic distortions” predicted by Einstein and can proceed through our entire lives without ever realizing or caring that Newtonian mechanics do not, in fact, describe the world as it is, but rather only as it seems to be within our own frame of reference. Does that mean that it is not objectively correct? No - not if we take “objective” to mean what it should mean; that there may be posited a standardized frame of reference by which differing individual traits may be measured. As long as the frame of reference remains consistent, then the standardized measurement will measure accurately.

Many physicists, however, have bemoaned that the Theory of Relativity is improperly named, because what it in fact reveals about the nature of the cosmos is that there are limits not predicted by Newton’s physics. Specifically, that the speed of light is the ultimate standard of measurement. It is not just a “speed limit” - it is the point at which matter and the energy used to move it reveal themselves as different aspects of the same property (which is why nothing other than light can move that fast). As we approach light speed, vast amounts of energy are required to produce exponentially smaller increments of increased velocity. Likewise, as objects become more massive and dense, they exert a greater gravitational pull, and the rulers with which we measure our ledgers bend along the contorted contours of space itself. At some point, Professor Hawking intones that we are “crushed to spaghetti.”

We can, of course, pretend that Newton’s d=rt applies everywhere at all times, and that we can move many times faster than light-speed if only we apply enough force to our chosen vehicle. We can decide to be ignorant, and calculate how much energy is required to reach Sirius B (8.6 light years away) in just under an hour. We could run the numbers - the math works just fine! And we could even chose to believe it. But it would be wrong. The math may work, but the numbers do not describe reality, because the extremes of speed and energy have changed the frame of reference, rendering the traditional means of measurement objectively useless.

How is this dealt with? The only way that it can be - “relativistic” equations are integrated into the Newtonian calculations, to accurately compare one frame of reference to another. Hence, we can calculate that greater and greater expenditures of energy are needed to produce ever smaller increases in speed, and no amount of energy will push a physical object up to the speed of light. These distortions are exponential in nature - the faster you go, the more the traditional measures of time and distance lose accuracy.

Might not something similar apply to monetary currency as an ethically viable measure of social entitlement? While the mathematical possibilities provided by capitalism, and its ability to produce exponentially greater gains upon larger amounts of wealth - to literally use money to buy more money - are technically limitless, does this mean that they are ethically limitless? If money, an immediate expression of our participation in a social contract, is premised on a limited frame of reference, might there not be, in principle, an objective limit to how much money one can ethically retain? Say, even, a maximum wage?

This of course depends entirely on what the x property is that money is truly intended to measure. If we accept the principle of the social contract - of which we give implicit approval by virtue of our participation in society - and we accept as well that the purpose of this contract is to establish and defend those qualities we deem to be intrinsic and inalienable by virtue of our being human (For what other purpose would the social contract exist except to say “We hold these truths to be self-evident“), then the x property must be an essential property, i.e., something accounted for by money but not created by it. The x property must then be a thing which predates all organized economies, all currencies and indeed all technology, and strikes down to the fundamental, raw core of the human condition, to the fact that we are thinking animals for whom food and shelter is not God-given. It speaks to the expenditure of a resource that, as individuals, is for us always limited: the strength of our mortal bodies, the attention and focus of our mortal minds, and the limited time on this earth we have to make our best use of them. It is that very thing every human does, as a fundamental assertion our right to be alive - our labor.

Labor, it bears repeating, and not work. Work is simply a term from physics which refers to anything that results from a productive expenditure of energy. There is no human referent in work. Labor is work performed by a human being. Social value is predicated upon human value, because society is predicated upon the human individual (”We hold these truths to be self-evident, that all men are created equal“). The social contract establishes itself as a frame of reference, and the human being is the standard of measurement. If monetary currency is to accurately measure the social value of labor, then it must do according to a human scale. A necessary corollary of this is that an individual human life is a thing of fixed value in any social frame of reference. This is what is meant by the term “inalienable.” Our labor is therefore also of fixed value in any frame of reference with reference to the individual performing it, since his mortality - the principle and defining fact that his time and energy is limited - is an unalterable and essential feature of being human. Clearly, not every human being is capable of performing the same amount of labor, same quality of labor, or living the same life-span. Abilities and constitutions vary, but the degree of variability is limited. The essential biological differences between the wealthy and the average are marginal (in that there is more overlap than difference - a defining necessity for any single species). It is social circumstance which varies the most.

If the Libertarian argues that, in a free-market capitalist economy, earnings reflect literally and absolutely the actual value of one’s labor, then he has walked into a tremendous self-contradiction, because the every defense made of “the market” and its invisible hand, the very “trick” that makes the capitalist mechanism function, is premised on the observation that wages and prices fluctuate according to circumstance. There is, in fact, no objective correlation of wages to labor per se - wages and prices are defined relative only to other prices and wages. They are the products of the economic system and its collective activity. And yet the social contract requires that we participate in this scheme of floating relative values, even though we know ourselves as men and women to be of fixed inherent worth, and the expenditure of our mortal energy to be of fixed and inherent worth to us.

Monetary currency and the values it measures are defined are purely relational properties, but the social contract that makes the economy possible is premised on a constant value - the fixed x property that defines the relationship between our labor and ourselves. How do we account for it in monetary terms? And how does this lead to a measurement of the social value of labor? Values, unlike dollars, are not simply things which exist to describe relationships between human beings - as if human beings exist in a bubble utterly separated and alienated from the natural world as a whole (though in fact the Bible does imply this). They do more than merely describe the opinions and feelings of people relative to one another. But what is the “external referent” by which society establishes a set of objective values? Theologians would like to suggest that it is God, perhaps because a fictional being (and He is fictional, even if real, as we can only know him through our imaginations) may be invented to suit the fancies of an elite, and hence “objective” facts may also be shaped to suit that elite. But in fact, values are inescapably predicated upon the world in which we must live, and the labor which must be exerted to survive it. Values are about the status of the human relative to other humans and the earth. As society alters through history, and the earth changes, the base-line by which we provide the standard of measurement of the social needs of a human life changes relative to history - but the fact that we are locked, as an objective fact of reality, into this earth-society relationship persists. It is our “relativistic equation” whose variable terms may change with time, but whose essential statement about our relationship to reality is fixed.

An individual’s value to society is predicated upon the value of the human to himself. It is the relationship of the individual to the earth which renders one’s value to oneself absolute. In a “Newtonian” moral world, an individual whose “value” is measured relative to society - as distance, rate and time are measured solely in relation to Cartesian space - would logically and necessarily become less valuable in direct proportion to the extent to which the world population grows. But let us accept, instead, the following - that a human life, like the weightless energy that hurtles through time and space, is a constant property of constant value in any frame of reference, that a human life is worth a human life, and that this is the case irrespective of how many human lives there are.

What this implies is not that we should enjoy a “common wage” of utterly flat redistribution. What it does mean is that the fundamental Enlightenment values enshrined in the Declaration of Independence and the Constitution provide, epistemologically and morally, a defensible social imperative to limit the extremes of wealth and poverty (It is no coincidence that, for the first 100 years following the creation of these documents, corporations were viewed as a social resource which had to be created by public charter, and whose activities were heavily regulated).

And here is the ultimate Libertarian trap. If monetary earnings are purely a relational, emergent phenomenon of market circumstance, without absolute value, then there is no morally absolute imperative protecting them from taxation. But, if monetary earnings do reflect an absolute property, that property can only derived relative to a concept of rights, which are premised on the indivisible self-worth of the individual and his inalienable traits as acknowledged under the social contract, and this necessarily extends to that individual’s right participate in society’s collective responsibility to set laws and limits. Hence, there is still no absolute moral imperative protecting the individual from taxation. Furthermore, it naturally follows than, human life and being of fixed value, and the social contract requiring equitable recognition of this fixed value, the extremes of wealth and poverty - because they distort the frame of reference upon which all rights relative to society depends - results in the exponentially increasing divergence from ethical accuracy of the monetary unit. Which means that the very notions of rights which make money ethically viable in the first place also require that society make “relativistic adjustments” to correct for the extremes of wealth and poverty, in the form of welfare and progressive taxation.

If a human being’s ability to eat, drink, clothe, and shelter himself (all of which do not require participation in an economy in any “natural” state) have been taken from him, because he cannot afford to do these things in the society in which he lives, then society has stolen from him his means to a livelihood, and owes him something in return as a matter of contractual reciprocity. The money in his pocket (if any) is no longer an objective account of his worth as a human being, because his worth as a human being, the fact of his being as a biological entity, requires that he have the means to procure these survival necessities.

At the extremes of mass and energy, space itself literally changes shape. Time passes more slowly for the affected observer relative to the cosmos as a whole. The extremes of wealth and poverty produce similar distortions, rendering the otherwise-trustworthy standard of currency - objective enough a measurement of our social entitlements and expenditures of labor in a middling frame-of-reference, bereft of the severe suffering or decadent luxury - an ineffectual measure of that property it is meant to account for. I can rightly say that no one owes me food, because I can buy food whenever I need it. I cannot say the same of someone who is starving in a Libertarian utopia; they did not choose this society, therefore society owes them the means to their humanity. This should not be a matter of “charity,” which is freely given, non-binding, and a matter of personal preference for the giver. It is a matter of necessary social compulsion. A social contract is meaningless if individual members of society may choose, for themselves, whom they wish to recognize as human and who they do not - and the allowance of human starvation is nothing if not a failure to recognize the victim as a human being on a fundamental, biological level.

There is a point at which personal wealth exceeds, far exceeds, any viable mortal index. When a human is as wealthy and powerful Olympian deity, or as impoverished as a captive zoo creature, they have fallen off the scale, out of the frame of reference upon which money depends to be a viably objective measurement of social entitlement.

This principle can be demonstrated empirically, with real world examples. If the Libertarian thesis were correct, then the wealth of any individual, no matter how great, is justified if that individual earned it legally, in the pursuit of free-enterprise. The assertion suggests, for instance, that the highest-paid CEOs in the world deserve what they were paid on the simple basis that, were their services not “worth” that amount, they would not be paid that amount. The allowances of the marketplace are thereby justified, and any taxation or regulation of this personal income amount to theft. But keep in mind that the Libertarian defends this position not solely on the grounds of non-interference in a private contract. The Libertarian is no mere anarchist. No, the Libertarian asserts that society’s “most productive” individuals deserve their wealth - and the tacit approval thereof in the eyes of society. The obvious implication is that there is a social value to individual productivity (which is surely true), and that the monetary reciprocity provided by the social contract in the form of standardized currency guarantees that the individual is receiving his proper due, that he has already “done right” by society by accomplishing whatever it is that earned him the wealth in the first place. The extent of his wealth is therefore a prima facie demonstration of social equity.

If this were true, of course, then the higher CEO payments would result in a corporate culture which produces results, i.e., the best products. And yet any glance at the world market today demonstrates that this is not the case. In Sweden, the typical CEO earns about one-third of what an American CEO earns. In Japan, it is closer to one-fifth. And yet, Japan and Sweden produce some of the most successful and innovative companies in the world (Saab, Volvo, Pfizer, IKEA, Honda, Toyota, Sony, and so on). Japanese cars now outsell American cars in California. Japanese companies have provided innovation and quality, whereas their higher-paid CEO counterparts, despite all the “incentives” they receive from their higher pay, are mired in backwards thinking. What should be obvious is this - CEO pay in America bears at best marginal, and at worst no relationship to what that individual has produced for society, and is entirely a product of the closed system - the isolated corporate culture - which determines it of its own volition. If the individual does not “deserve” his vast piles of wealth in the eyes of society, why should be entitled to spend it freely in society?

The contradictory philosophical groundings of modern Libertarianism will be the subject of “Outing the L-Word Part 4: Objectivism.”

For some illuminating information CEO salaries in the U.S., in comparison to the world at large, I recommend . I do not endorse of all the views expressed herein, and find fault with some of the analysis provided in the second half. Nonetheless, the first half of the paper provides a concise store of data tables, and correctly grounds discussion of the issue in the concepts of social reciprocity and fairness.

Andrew S. Taylor is the Associate Editor of Menda City Review, an online journal of literature and political commentary. His own short stories, which veer towards the experimental wing of the speculative fiction/slipstream fantasy genre, have appeared online and in print in various publications. He has also contributed numerous articles and reviews to American Book Review and Ghetto Blaster Magazine.

In addition to these literary pursuits, Andrew writes a blog called Oni-goroshi’s Bleeding Heart, which is dedicated to exorcising his demons on the topics of politics and culture. Many of his essays can be found at Thomas Paine’s Corner and Menda City Review.

He holds an M.A. from the Creative Writing Program at The City College of New York, and currently resides in Brooklyn.

4 Responses to “What is Money? Outing the L-Word Part 3”

  1. […] Thomas Paine’s Corner By Andrew S. […]

  2. Gailon 17 Jun 2007 at 7:48 pm

    If the product of the person’s labor in relation to its importance to society is the yardstick, then why are doctors, EMTs, nurses, psychologists, teachers, law enforcement, military, general dentists, farmers etc etc. paid relatively poorly compared to today’s CEO making soup or another product which is not really necessary. Entertainment is one area in which people who are famous make millions. The CEO ’s of cigarette companies make millions on a product which is life-taking as opposed to life-saving. An attorney can make tons of money because they have the language and ability to confront legal issues and navigate a court system which most of us cannot. You think maybe the values of the society are a bit wierd? As far as I am concerned the doc who makes me well deserves the most, lest I languish in illness (even minor illness) and cannot produce or would otherwise die. Yet the insurance industry decides how much my doctor’s work is worth. This society has a lockdown of corporate greed which bears no relationship to the importance of an individual’s worth in terms of what they produce. It does not even take educational level, or skill level into consideration. Somehow being a “businessman” does not cut it, particularly with the level of fraud and greed we are seeing today.

    If I am living in post peak oil America, and I have one horse who does considerable work and takes me to town…if he punctures his leg and is lame, it is the farrier who is of value. It is the herbalist who knows and makes the remedies who counts. It is the farmer who knows how to produce the most food. It is the person who can manage the water to make sure it is safe. It is the person who knows how to build viable shelter from the elements. It isn’t the CEO of MacDonald’s/

  3. DurangoKidon 18 Jun 2007 at 2:32 pm

    Banking was probably the first form of transnational capitalism. Capitalism is predicated on the private ownership of the means of production and the commodities produced thereof. In the case of banks, the commodity is money loaned into existance and the ownership is by the banks. Thus, the universal commodity for which all others is exchanged is controlled by a small coterie granted a monopoly by the state. The value of the stock of money is controlled by its supply. The value of all other commodities is measured in money units. Labor is just another commodity except that it has no material component. An institution that controls the value of all that is exchanged for its money can use that power to siphon off a portion of that value either by interest or by contraction.

    Money issued by a state under democratic control by the populace avoids this trap by issuing currency without obligation to lenders or subject to contraction at the whim of private interests. The stock of money can be regulated by consent of the governed to facilitate the trade of commodities at stable prices. In this case, money is the servant of people and not their shackle.

    Neither a borrower nor a lender be. - Benjamin Franklin

    .

  4. DurangoKidon 18 Jun 2007 at 4:13 pm

    Questions? Comments?

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