World economy has reverted since the break-up of the Bretton Woods system of fixed parity exchange rates to the plural pattern of competing currencies that was normal before the modern era. The crisis was precipitated by the creation of an offshore banking system which brought the informal economy to the heart of global finance (Shaxson 2011). It was also significantly a result of a separation of functions between different types of monetary instruments. Central bank control was eroded by a shift to money being issued in many forms by a global distributed network of corporations, not just governments and banks.
The digital revolution in communications has been transforming money and exchange for two decades now (Hart 2000). Radical cheapening of the cost of transferring information introduces new conditions for engagement with the impersonal economy. The formation of world society is driven by money, markets and telecommunications.
This process of social extension beyond national boundaries is fraught with danger, much as the kula ring was (Malinowski 1922). We need to extend systems of social rights to the global level before the contradictions of the market system collapse into world war. But local political organization resists such a move. This dialectic of globalization is very ancient. Ours is becoming a multi-polar world whose plurality of associations and convergent income distribution resembles the medieval period more than anything since.
This is the context for understanding the monetary crisis that has overwhelmed the eurozone of late. The apparent triumph of the free market at the end of the Cold war in 1989/90 induced two huge political blunders. Radical privatization of Soviet bloc public economies ignored the common history of politics, law and social custom that shored up market economies in the West, thereby delivering the economy to gangsters and tycoons. And the European single currency was supposed to provide the social glue for political union without first developing effective fiscal institutions or economic convergence between North and South.
The big mistake was to replace national currencies with the euro. An alternative, the hard ecu, would have floated politically managed national currencies alongside a low-inflation European central bank currency. Countries that didn’t join the euro, like Britain and Switzerland, have in practice enjoyed the privilege of this plural option. Eurozone countries cannot devalue and so must reduce their debts through deflation or default. The euro came after money was already breaking up into multiple forms and functions. The Americans centralized their currency after a civil war; the Europeans centralized theirs as a means of achieving political union.
If Polanyi’s ghost is haunting us now, so too is Georg Simmel’s. One of money’s anchors, according to him (Simmel 1900), was its physical substance (metals, paper etc). He believed that this would wither away, revealing more clearly money’s functionality (the ends to which it is put and its technical organization). Money’s essence is what people use it for in society. It always introduces a third party to bilateral exchange — the community that shares its use. Virtual money would make that social foundation of money more explicit.
Simmel’s prophecy has been realised to a remarkable degree, as the digital revolution accelerates and cheapens electronic transfers (Dembinski and Perritaz 2000). But if the essence of money is its use in a community with shared social institutions, national capitalism has lost its grip on reality. We must therefore move from singular (national) to plural (federal) conceptions of society. The infrastructure of money has already become decentralized and global. A return to the national solutions of the 1930s or to a Keynesian regime of managed exchange rates and capital flows is bound to fail.
Where are the levers of democratic power to be located, now that globalization has exposed the limitations of national economic management? The cultural logic of national capitalism leads the political classes who got us into this mess to repeat the same mistakes. Politics is a dialogue of the deaf, between those who deny the need for any political regulation of markets and others who remain trapped in the outmoded model of central bank money.
The idea of world society is still perceived by most people as at best a utopian fantasy or at worst a threat to us all. We need to build an infrastructure of money adequate to humanity’s common needs. This agenda seems impossibly remote right now. One move in such a direction goes by the name of “alter-globalization” (Pleyers 2010). The idea of a “human economy“(Hart, Laville and Cattani 2010) offers a bridge to that movement.
“Economy” is putting ones house in order in a world shaped increasingly by markets (Hann and Hart 2011). Social units of widely varying scale may be said to have one. Economy is pulled inwards to secure local guarantees of a community’s rights and interests; and outwards to make good local supply by engaging with outsiders through the medium of money and markets of various sorts, not just our own (Mauss 1925).
The idea of a human economy relies less on abstractions than on what people are doing already, with the aim of imparting a new emphasis, combination and direction to their efforts. A preliminary definition of its assumptions would include the following:
- Aim for a pragmatic economics that people can understand and use
- Economy is made and remade by human beings
- A focus on complex institutional particulars
- A more holistic conception of everyone’s needs and interests
- Address humanity as a whole and the world society we are making
Three things count in our societies as they are increasingly emancipated from a territorial base — people, machines and money, in that order. But money buys the machines that control the people. Our political task – and I believe it was Marx’s too – is to reverse that order of priority, not to help people escape from machines and money, but to encourage them to develop themselves through machines and money.
A Sophoclean tragedy
To the idea of economic crisis and its antidotes, we must now add in the possibility of war and political revolution. Revolutions are fed by digital contrasts with what has gone before, but the human economy is built on analogue processes. Europe has become the main focus once more of a world revolution. The euro crisis is a Sophoclean tragedy in which good intentions cannot remedy the consequences of past mistakes. Now if ever a synoptic vision of humanity’s plight is vital, if we are to save ourselves from a disaster that our institutions prevent us from even seeing, never mind avoiding.
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