We probably tend to take the monetary and financial system we have today for granted, somewhat like the air we breathe. I was also challenged during the week to describe a non-money future and my response was judged a failure to look outside the square. The best I could offer was to note that Star Trek imagines a society in which unlimited cheap energy coupled with replicators has made money redundant.
By chance, I came across a couple of articles in recent weeks that offer interesting perspectives on what money is and its role in the economy.
One was by Tyler Cowen marking the 75th anniversary of Bretton Wood’s but more imaginatively subtitled “Every era’s monetary and financial institutions are unimaginable until they are real”. The other was an interview with a German philosopher Stefan Heidenreich discussing his book titled “Money: For a Non-money Economy”.
The Bretton Woods agreement of course is not the system we have today but Cowen makes the point that the system we operate under today would appear equally unlikely to previous generations:
“Currencies are fiat, the ties to gold are gone, and most exchange rates for the major currencies are freely floating, with periodic central bank intervention to manipulate exchange rates. For all the criticism it receives, this arrangement has also proved to be a viable global monetary order, and it has been accompanied by an excellent overall record for global growth.
Yet this fiat monetary order might also have seemed, to previous generations of economists, unlikely to succeed. Fiat currencies were associated with the assignat hyperinflations of the French Revolution, the floating exchange rates and competitive devaluations of the 1920s were not a success, and it was hardly obvious that most of the world’s major central banks would pursue inflation targets of below 2%. Until recent times, the record of floating fiat currencies was mostly disastrous”
Cowen’s main message is that the lesson of history suggests that it is brave to assume that the monetary and financial institution status quo will hold forever – so what comes next?
This brings us to Stefan Heidenreich.
“Stefan Heidenreich believes that some day, money will seem like an ancient religion. In his recent book Money: For a Non-money Economy, the German philosopher and media theorist speculates on how the money-based global economy could soon transition to an entirely different system based on the algorithmic matching of goods and services. Such a system could match people with what they need at a given moment without relying on the concept of a stable, universal price — and, just possibly, do away with the vast inequities caused by the market.
If you find the idea of an economy without money hard to imagine, you’re not alone. As the saying goes, it’s easier to imagine the end of the world than the end of capitalism. But that very difficulty proves Heidenreich’s main point: We have to imagine what may sound like wild possibilities now in order to steer the future before it’s upon us. Getting rid of money could lead to what he calls a “leftist utopia” of equal distribution — or it could enable mass surveillance and algorithmic control on a whole new scale. Faced with the second option, Heidenreich says, we have no choice but to try to envision the first.”“The Economy of the Future Won’t Rely on Money” Elvia Wilk (Medium 30 November 2018) https://medium.com/s/story/the-economy-of-the-future-wont-rely-on-money-5a703e0ad30b
It is not obvious to me that Heidenreich’s “matching” proposal provides a workable alternative to what we have today but that is not the point. The bigger point raised by both Cowen and Heidenreich is that what we have today is unlikely to be the system that governs our economic interactions in 50 years time so what is the alternative?