The How of the Economy – Money and Value
Of course, we need to ask not just what a new economy could look like, but also how we can get there. That will be the focus of this chapter. As this is an attempt to encourage an evolutionary process, we will apply the aims and principles of the new economy to the previously discussed six features of capitalism and their respective counterparts (e.g. fiat money being one feature and value its counterpart). Social synthesis takes the approach of recognising both the limitations and the strengths of the existing system – in other words, it is an attempt to transcend capitalism without throwing the baby out with the bathwater. This is not unusual. For example, we reject institutional slavery, which was an integral part of the social and economic systems of antiquity, but we still recognise other values of the ancient world and have built on its philosophy, arts, inventions and political organisation. In the same vein, transcending capitalism does not entail obliterating everything associated with it. Previous attempts to do so often led to something even worse. After all, fiat money, individualism and investment, as well as mass production and consumption, contributed to fast economic growth; this in turn contributed to, in comparison to pre-capitalist periods, greater longevity, reduced child mortality rates, and improved health, education and living standards for many, if not all. Those six features were no doubt useful, are here to stay at least for a while, and can still be useful. We don’t want to get rid of healthy competition, helpful borrowing and lending, production that satisfies real human needs, or money that reflects the real value of products and services. However, all of these things seem currently to be out of control and are starting to have a negative impact on the economy and society. Capitalism was, for a while, a progressive system, but it is not anymore. We saw in the previous chapter that three conditions led to its decline: exponential separations, hitting the ceiling, and socio-psychological factors. The convergence (synthesis) of what has been separated is needed to reverse exponential separation and can, we suggest, also help reverse the other negative trends. This does not mean going back in time. In the long march towards exponential separation, some irreversible changes have taken place. We couldn’t go back even if we wanted to, but we can establish these links anew and perhaps create something that is even better than what we had before.
Nowadays, people know the price of everything and the value of nothing.
From where we are right now, it would be rather naïve (at least for the time being) to advocate abolishing money. As argued in the first chapter, fiat money brought some economic advantages, and we still need it. The greatest problem at present is not money as such, but its increasingly dysfunctional relation to value. Before capitalism and even in the early stages of capitalism, money was considered as a mere means of exchange (hence, it was not even included in classical economic thinking); in later stages of capitalism, money become value in itself, in many cases only thinly connected to what it is supposed to represent. In order to gain control of the runaway train again, we need to strengthen this connection in both directions: from money to value, and from value to money. We will suggest next how it can be done.
Linking Money To Value
This part covers money creation, debt, and banking. These are grouped together as they are very much interlinked and are at the heart of the current financial system.
Linking Value To Money
In simple terms, the value of any product derives from the natural resources and work invested in producing or providing it. As we will discuss natural resources and their relation to value in a separate chapter, the focus here will be on work.